Sustainable banking products
In this week's blog, I will share more about the financial products of sustainable banks.
As mentioned in the last blog, the wave of sustainable finance requires banks to offer sustainable financial products and services, which is a great opportunity for the banking industry, the financial markets and customers. The introduction of sustainable banking products by banks can increase its profitability and market value and help to improve credibility (Carè, 2018). The financial products of sustainable banks are mainly focused on social and governance (ESG) aspects, specifically, banks can provide financial support and sustainable strategy advice for sustainable projects. Mainly in the area of credit, sustainable financial markets and products are offered using the fintech ecosystem (Mejia-Escobar et al., 2020).
Sustainable banking products
Green mortgages offer lower interest rates than market rates, making homes and cars more environmentally friendly and less expensive. For example, ABN AMRO Bank offers a 1% interest rate reduction for loans that fit environmental criteria. The New Energy Bank of America offers preferential loans for leading green projects in commercial buildings.
Moreover, some banks, credit card companies and charities have partnered to offer charity credit cards and green credit cards. 0.5% of every purchase, transfer or cash advance is donated to the charity (Carè, 2018). For example, the China Red Cross Society and ICBC have developed the " China Red" charity credit card, which donates 1 RMB to the China Red Cross Foundation for every card application and 1 cent RMB for every purchase.
Green leasing is a new force in green finance, with banks supporting economic activities such as environmental improvements, combating climate change and the economical and efficient use of resources at favourable rates. Santander performed over 300 €35 million financing deals in 2015 to fund a variety of LED lighting, boiler replacement, waste treatment, and other projects. It also has 1,037 solar Photovoltaic lease financing agreements for €245 million (Santander Sustainability Report 2017).
All of the above-mentioned products are still in a high growth phase. As the sustainable banking process grows, so does the need for sustainable products and services, which is creating new opportunities in several sectors such as agriculture, energy and construction. I hope that these sectors can create a coordinated industry effect and work together to promote the development of sustainable finance.
Figure 1. some examples of sustainable banking products. Note: Carè (2018)
Thank you for reading the end of this blog, if you know more sustainable products in banking, don't hesitate to share them in the comment, appreciate any thoughts.
References
Carè, R. (2018). Emerging Practices in Sustainable Banking. Sustainable Banking, pp.65–92.
Mejia-Escobar, J.C., González-Ruiz, J.D. and Duque-Grisales, E. (2020). Sustainable Financial Products in the Latin America Banking Industry: Current Status and Insights. Sustainability, 12(14), p.5648.
Santander. (2017). 2016 sustainability report. Madrid
