The Rise of Lending for Sustainability Initiatives
Just about every sector in the last decade has seen an increasing awareness of business practices that focus on sustainability and environmental improvement. Brought about by what was originally termed “activist investors,” the so-called “green business” commitment to environmentally sustainable investing and commerce is now seen to be a financially prudent business model throughout most of the world.
Banks worldwide have increasingly paid attention to how their lending practices impact the various components of global supply chain management and technology development related to sustainability. In addition to charitable giving, another way banks are looking to make a difference is by implementing “green banking” practices – a more holistic approach to lending decision-making. At a recent international banking conference I attended, green banking was a main topic of conversation, and for good reason. By lending to support sustainability, banks have the opportunity to make a big impact.
Why is lending to support sustainability initiatives important?
Green banking – lending to businesses focused on sustainability initiatives – has had a direct impact on issues such as the reduction in child labor in many areas of the world and the promotion of more environmentally sustainable agricultural practices in the United States and abroad.
Green banking has also played a major role in driving innovation in important areas such as the energy, travel, and bio-agriculture sectors, just to name a few. With green finance backing, many manufacturers are now developing multi-use products as an alternative to single-use products.
For examples closer to home, look no further than local biodiesel and biofuel companies developing and producing alternatives to petroleum-based fuels, or local seed companies advancing cutting edge, climate positive technologies in their seed development.
In addition, there have been enormous strides in wind energy technology, production, and implementation, as well as incredible research and development being done at our local public and private universities. All of these are examples of local innovation with a global impact. And in most cases, these industries and entities are banking locally.
What is the impact of green banking?
Regardless where you fall on the spectrum of opinion on climate change or environmental issues, there is solid evidence that, although still in its infancy, the rise of green banking and finance has had positive impacts helping:
- Drive change in technology (especially technology used in fuel, seed and wind production)
- Reduce waste and realize cost savings
- Contribute to climate sustainability and improving the quality of life for many people worldwide