‘Environmentally conscious life’: Green loans boom for Bendigo

Two decades after Bendigo and Adelaide Bank issued its first personal green loans, the company has recorded a more than 600 per cent rise in demand for the product within a year, as banks compete to promote their green credentials.

Richard Fennell, the bank’s chief customer officer in consumer banking, said the bank had settled its highest number of green loans in the past year.

Bendigo Bank said the biggest driver of growth in green loans was electric and hybrid vehicle purchases.Credit: Justin McManus

While the growth is off a low base, and Bendigo did not reveal the dollar value of the loan portfolio, Fennell said borrowers were increasingly looking to reduce their carbon footprint.

“Our customers are conscious of environmental issues and see the benefit of embracing technologies that are good for the environment,” he said. “Getting a competitive interest rate while supporting the environment makes the decision a lot easier.”

The green loans – which fund spending on sustainable goods – are priced nearly 3 percentage points a year lower than the bank’s personal loans.

The biggest contributor to growth in green loans for the bank has been electric and hybrid vehicles, but eligible purchases include solar assets, grey water treatment systems, double glazing and energy-efficient white goods.

‘We’re seeing many Australians wanting to lead a more environmentally conscious life.’

Ben Morgan, CBA general manager in retail and sustainability

It’s not the only bank to have experienced growth in green loans.

Ben Morgan, the Commonwealth Bank of Australia’s general manager in retail and sustainability, said its sustainable financing options were increasingly popular as cost of living pressures bite.

“We’re seeing many Australians wanting to lead a more environmentally conscious life,” he said. “However, for many customers one of the barriers to purchasing eco-friendly options is the initial, upfront cost. In addition to the environmental benefit, people are also seeing potential savings benefits, especially in light of rising fuel and electricity costs.”

Morgan said those factors were helping to drive demand for electric and hybrid cars as well as retail solar and batteries.

Demand for electric cars has helped drive green loan growth.Credit: AP

As of June 2022, Commbank had provided $31 billion in sustainability funding to retail, business and institutional customers. In addition to its existing green home and home improvement loans, the bank launched its first green personal loans in October.

Associate professor Christina Nikitopoulos, a researcher in sustainable finance at UTS, said demand for green loans had increased substantially in the past few years.

“Green loans are a relatively new credit instrument, but with corporations trying to meet their 2030 emission targets, there’s a multimillion dollar opportunity for green finance in Australia,” she said.

Nikitopoulos said businesses, particularly in commercial property, were the main driver, but that lower interest rates associated with green loans compared with personal loans made them increasingly appealing to consumers.

“The biggest growth area is demand from businesses with banks offering to a larger range of commercial clients," she said. "But individuals are coming on board and continuing to drive significant growth by using the funding to purchase and install energy-efficient products."

National Australia Bank noted in December that high energy costs were helping to fuel surging demand for electric vehicles, solar panels and batteries among its business clients.

The bank said business loans to finance electric vehicles and plug-in hybrids had ballooned by 900 per cent since 2020, and that loans for solar assets such as solar panels and batteries had jumped 600 per cent since 2020.

While Commbank’s executive general manager of home buying, Michael Baumann, said last year that younger customers were especially likely to raise sustainability issues, Fennell said customers of all ages were expressing interest in sustainable ways of living.

“It’s amazing to see how far we’ve come since launching the green loans in 2002, with more customers wanting to reduce their carbon footprint than ever before,” he said. “Being environmentally conscious isn’t restricted to a single demographic.”

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.