26 Jul 2021
Green finance is designed to fund sustainable businesses and business activities. However, a few remaining misconceptions about the costs and benefits of green finance mean some businesses are putting their initiatives to transition to net-zero on hold. Here’s why it’s time to lay any doubts aside and turn those green ideas into a reality.
Green finance is a fairly new concept but one that’s quickly gaining traction in the business community. SMEs are responsible for around 25% of the UK’s CO2carbon emissions, and if we’re going to reach the Paris Agreement target of net-zero emissions by 2050, we need to make sure the finance we need to kickstart green projects is readily available.
Let's take a look at – and debunk – some of the lingering myths surrounding green finance.
Although ‘going green' is undoubtedly good for corporate reputation, environmental practices are proving to be profitable too. Adopting an economic model that is viable in the long-term is no longer an option but key to a business’ survival.
Increasingly, consumers are prioritising the social and environmental credentials of the companies they buy from. Putting sustainability first can help businesses attract and retain more customers as well as protect themselves from reputational risk.
A report by HSBC titled ‘Who Cares Wins: The rise of the young, socially and environmentally motivated consumer’ found that the majority of US respondents would spend more on sustainable products. It also identified a trend towards not supporting businesses that don’t demonstrate a commitment to green business practices.
“A growing number of lenders are joining our Green Finance Marketplace – a clear indication that the business finance market is heading in the right direction.”
The idea that green projects negatively impact a business’ bottom line is another myth. In fact, there’s a lot of research out there pointing to the opposite.
An Oxford University and Arabesque Partners meta study based on over 200 studies on return on responsible investments or investments following environmental, social and corporate governance (ESG criteria), found that companies with better sustainability performance experienced a lower cost of capital.
There’s also an appetite among business finance lenders to fund green businesses or green projects, from switching to an electric vehicle fleet to installing solar panels on the roof of a business premises. A growing number of lenders are joining our Green Finance Marketplace – a clear indication that the business finance market is heading in the right direction.
Of course, it’s critical for big businesses to prioritise sustainable practices in their own organisation and throughout their supply chain. However, it’s just as important for the SME community, which makes up 99.9% of the UK business population, to play its part. Not least of all to ensure they remain competitive and profitable in the future.
SMEs across a range of sectors are adopting the circular economy business model. As well as being more environmentally friendly, this approach of repairing, recycling, refurbishing and reusing can lead to some serious savings. Reducing energy usage also enables small businesses to operate leanly and reinvest in other areas of the business.
As green finance grows in popularity investors are taking startups’ and scaleups’ sustainability performance into even greater consideration. For example, when HSBC surveyed Asian investors, 86% said they thought environmental issues were important and 31% reported that they take ESG considerations into account when investing.
You’d have to be living under a rock to think that sustainability is a passing phase, however we thought it’d be worth mentioning anyway!
It helps businesses to think of green initiatives as a way of investing in the future of their own business as well as the planet. Recent events have shown that environmental damage can incur huge financial costs for businesses and wider economies. Many businesses can’t operate properly without adequate weather conditions, for instance.
Over the next few years, the most successful companies will be those that take proactive steps today to becoming more sustainable.
To support this, we’ve created a Green Finance Marketplace that will help SMEs fund their journey towards reaching net zero, and enable lenders to power the move to a more sustainable future. If you’re a business looking for funding from a lender who follows sustainable practices, we’ll match your needs to our panel of vetted green lenders.
If you’re a green business whose core mission is sustainability, or if your company is looking to purchase a green asset such as an electric vehicle or a solar panel, we’re proud to say we can now connect you to the right lender quickly and easily.
Check out what you could be eligible for today.Get green finance
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