CBA steps up fight for business loans with new green option

CBA wants to overtake rival NAB as the business lender of choice and hopes its new ‘green’ term loans for medium sized firms will help it get there.

CBA wants to overtake rival NAB as the business banker of choice. Picture: NCA NewsWire / James Gourley

Commonwealth Bank is seeking to accelerate its lending to businesses, launching new “green” term loans for medium sized firms seeking to undertake certain capital expenditures.

The nation’s largest lender is fighting to overtake National Australia Bank as the business lender of choice and the new green term loan for businesses builds on other recent green financing products.

CBA business lending general manager Grant Cairns said customers were increasingly focused on sustainability and reducing their environmental impact, in response to demands from their own customers as well as rising costs.

“There are definitely a lot of businesses looking to put in more efficient plant and equipment in their operations to reduce costs but also to reduce emissions,” said CBA business lending general manager Grant Cairns.

Like most of its big rivals, CBA’s sustainable finance offerings to date have typically been targeted towards institutional customers or have been very sector specific.

But as more businesses look for ways to cut emissions and operate more efficiently to save on bills, its new green loan for businesses expands that range.

It comes on top of existing financing products focused on agribusiness lending, green home loans, green vehicle and equipment financing, and green corporate loans.

“Essentially, what we’ve identified is that some of our solutions don’t meet all of our customers’ needs, which is why we’re launching this solution … to meet those other needs that they have,” Mr Cairns said.

Grant Cairns

The expansion of its green lending range for businesses also comes as many Australian companies rush to meet a deadline for mandatory climate reporting for financial years starting after June 30.

Large companies will have to publish public climate statements underscoring climate-related financial risks and opportunities, scope 1 and scope 2 greenhouse gas emissions metrics and targets, and climate-related governance and risk management processes.

CBA’s new green business loan can finance anything from water efficiency and pollution prevention initiatives, to solar, wind, hydropower and energy efficient motors, to recycling, refurbishment and composting projects.

The loan will also be more flexible than the previous leasing or hire financing provided for equipment, Mr Cairns said.

“We’re really developing our products in response to our customer needs and they’re obviously more and more focused on how to become more sustainable – (and) that’s being driven by their customers,” he said.

“It’s also being driven by higher input costs, like electricity. So more and more businesses are looking at how to become more efficient, and that’s where the bank comes in to play a role in helping with a financing solution.”

Mr Cairns did not share what level of demand he expected for the product but said it would contribute to the bank’s 2021 commitment to finance $70bn of sustainable initiatives by 2030.

As of June 30, the bank had completed $45bn out of that target, largely from loans to energy efficient buildings and sustainability-linked corporate loans.

Interest rates on the loan start from 6.49 per cent, but the ultimate pricing would depend on the client and the individual circumstances. That compares with the “better business loan” product the bank offers of 8.35 per cent for residentially secured loans.