The environment and its treatment is possibly the defining issue of our time. It consumes the political and consumer agenda. Increasingly enlightened buyers are investigating prospective purchases for their environmental ratings. The knowledge amongst consumers is leading to greener choices in all fields and encouraging companies to modify their business practices. Being green is no longer just the right thing to do, it is also profitable.
It is no wonder banks and financial institutions have taken an interest in the environment. This has included rolling out sustainable operations and practices throughout their own business. In many cases, such as the case of encouraging customers to move away from paper statements, doing the right thing has positively impacted the bottom line.
The use of renewable energy and following green building practices has also become industry standard. But where are banks and insurance companies best positioned to make a difference? Ironically it is not within their businesses, but rather outside of them. Through sustainable lending and helping to get green business off of the ground with affordable financing, banks and investment houses are making a world of difference in the environmental realm at alternative energy stocks and providing risk assessment around the world for them.
One of the most quickly advancing areas where the banks have helped the environment includes sustainable investments. These investments are marketed to clients on the basis of the low environmental footprint of the funds holdings. Such investments usually consist of sustainable companies. This would include wind farms and other green projects.
Lloyds and its cover holder GCube and reinsurer Munich RE have taken on the role of insuring projects with an environmental focus. They recently underwrote for the 160MW Noor 1 solar power facility in Morocco. The underwriting of the installation phase of the project for 21 months allowed it to proceed and the concentrated solar operation or CSP, the first outside of North America, has taken shape in the desert.
The same syndicate has also worked to keep biomass projects in the United Kingdom on track. This includes the 80 MW waste wood pellet combustion biomass plant in Ridham Dock, Kent. The energy that will come onto the UK grid as a result of the project will sustainably power thousands of residences. Similar to other projects green projects need insurance to mitigate risks. This includes insurance for delays in startup, loss of components in transport, and error in site design.
Using their Expertise for Bettering the Environment
Banks and insurance companies are two businesses that on their own are not environmentally unfriendly. Generally outside of the paper they use, there is little in the way of negative environmental consequence from their operations. Their best contribution to the environment is through their understanding of lending and insurance products.
These are two areas that with their expertise position them to add value to any project of an environmental nature. Their increased openness to financing green deals has, in its own way, led to the creation of a new business line.
Demand for sustainable investments from both retail and wholesale investors is one of the fastest growing market segments, annual reviews in sustainable investment have shown a year on year increase. By being leaders in the environmental movement through innovative financing instead of laggards the banks and insurance companies position themselves for a new round of growth. Making their choice to support the environment both a profitable venture, and the right thing to do.