The decision to finance green initiatives such as hybrid vehicles and eco-friendly home improvements involves the convergence of several factors, according to “Finding Sustainable Profits: Green Lending in Credit Unions,” a report by the Filene Research Institute.
The report identifies several common reasons credit unions decide to enter the green arena:
In some cases, board members will raise the issue.
The Filene report cites a credit union board member who was familiar with a local utility company that was seeking partners to finance residential energy improvements.
The board member raised the issue with the credit union’s manager, and senior staff were directed to evaluate whether the credit union should offer energy efficiency loans.
Some credit union staff had already contemplated the creation of a green lending program independent of the board. Therefore, the board member’s inquiry helped to legitimize the exploration of green loans.
In another instance, the board played a key role by adopting an environmental mission statement for the credit union. This action was implemented at about the same time the staff was developing ideas for a suite of green loan products.
Sometimes the initial impetus came from outside parties who contact the credit union’s CEO. At one credit union, the CEO was approached by the county executive to participate in a program to finance energy improvements in older houses.
In other cases, credit unions are contacted by select employee groups (SEGs), including one where city officials sought a lender to finance residential solar energy improvements at discounted interest rates. In this case, the credit union later expanded it solar loan program to the employees of all of its SEGs.
Commitment to the environment
One credit union’s decision to offer green loans was driven by a desire to measure and reduce its environmental impact as part of its participation in the Global Reporting Initiative’s (GRI) G3 Sustainability Reporting Framework.
To start, the credit union calculated an annual inventory of its carbon emissions, develop reduction goals, and take steps to reduce its impact. Through a series of steps, the credit union reduced its overall carbon emissions by 13% over a three-year period.
The credit union also calculated the greenhouse gas emissions generated from its auto loans and mortgages and created loans to help members make more sustainable choices—for example, by offering interest-rate reductions for members who purchase hybrid vehicles.
One credit union introduced a suite of green products to create a point of differentiation in a competitive marketplace. Its service area has a high degree of environmental consciousness that appealed to residents and elevated the credit union’s name recognition.
According to the CEO, the effort resulted in a significant source of loans for the small credit union.
Good for members
Green loans can reduce what members spend on gasoline and lower monthly utility bills, especially during times of rising energy prices.
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