Direct Lenders going Green
07.01.2020 by Dimi V
January 2016 saw the successful launch of the Green Finance Initiative. The initiative was conceived and set up by the City of London Corporation which is responsible for running Londons’s Square Mile.
The corporation firmly regards green finance as an essential element of the industry and a crucial way to cut down levels of carbon. The initiative was set up in partnership with the government and was focused on several clear aims.
The initiative has worked to provide leadership in the green finance sector and help advocate for new policy proposals as well as regulations. In doing so, they hope to enhance the green finance sector on an international level while ensuring that the UK is at the forefront of this change. Particularly through the available professional services and green finance options available on the market.
Numerous businesses are already part of the Green Finance Initiative including Ashurst, Avia Investors, Barclays and Hermes Investment Management. However, there is still a lot of work required to ensure that the green finance sector continues to grow. To ensure the success of this initiative it is key that companies commit to innovative concepts and aim to become zero-carbon corporations.
There has already been a fantastic level of success since the implementation of the Green Finance Initiative. For instance, $25.3billion has been raised in different currencies by Green bonds that are listed on the London Stock Exchange. There are also 90 different Green Bonds listed on the London stock change over seven different countries. Furthermore, output for renewable sources has generated nearly 33% of the UK total generation according to the Carbon Bridge.
Many UK energy projects have also been funded through crowdfunding solutions with 121 covered in total.
Bringing Green Finance Into The Mainstream
The UK recently made a commitment to cut emissions to net-zero by the year 2050. To achieve this goal, it is absolutely vital that investment in sustainable and environmentally friendly businesses is encouraged. There is already evidence that the environmental impact is becoming a key concern for borrowers and lenders in the industry.
The good news is that there has been a steady decline in the level of greenhouse emissions since the introduction of the Climate Change Act in 2008. Therese May’s proposal was intended to speed up this process, but again, this will require a higher level of innovation than what we’re seeing right now.
In 2018 the FCA scrutinised the UK’s transition towards a green economy. Specifically, they investigated the actions that would need to be taken to assist the change. As well as this, the PRA launched a report on the financial impact for insurers, assessing the potential risks that climate change could bring.
By June 2019, the treasury committee had launched a full enquiry referred to as Decarbonisation of the UK Economy and Green Finance. It explored the role that green finance could have in decarbonising the British economy.
The enquiry covered a variety of key areas including the role that financial services firms are currently playing in the transition to net-zero and the economic opportunity that is available.
The Response Of The Loan Market
The loan market has responded to the plan to bring green finance into the mainstream and put it at the forefront of achieving the net-zero goal. The loan market provided a paper on Sustainability Linked Loan principles to promote sustainable development and adopt green policies throughout Europe.
The aim of the LMA principles will be to test borrowers on the performance with set sustainability performance targets throughout the term of a loan. If the borrower company hits the SPT, they will be able to access more favourable terms from the lenders.
While not yet a market standard, the LMA principles pave the way for substantial loans that are directly linked to potential levels of sustainability. For instance, Nokia’s 1.5 billion loan was announced in June 2019. One of the key performance targets in the loan requires Nokia to reduce its greenhouse emissions by 41% by 2030.
Similarly, Argents £400m development facility is tied to the development of two low carbon office buildings within Kings Cross. This does include the new UK headquarters of Facebook.
Challenges For The Finance Industry
Despite the fact that the loan market has clearly embraced the concept of green finance, there are certainly challenges that are preventing companies from achieving green goals. Many businesses are stuck in the past, relying on outdated concepts that increase their carbon footprint.
This is certainly apparent in the car loan market with logbook loans.
What Are Logbook Loan Providers?
As the name suggests, logbook loan companies require the borrower to hand over their logbook to the lender in exchange for a loan on their vehicle. These loans are also available on a variety of other vehicles as well, including vans, and motorbikes. The loan will usually be provided in the form of a cheque. However, many businesses may provide cash which is then directly available.
Immediately, there is an issue here for a business seeking to reduce their carbon footprint. The process relies on multiple paper processes that are destructive to the environment. Similarly, there is also the need for multiple agents visits that increase the carbon print of a company and the impact it has on the environment. The issue here is that businesses are getting trapped underneath processes that are damaging the environment and may stop the UK from reaching the zero net carbon goal.
However, a reputable company is offering a fantastic alternative, reducing its carbon footprint and delivering a streamlined solution to its clients.
Vehicle Equity Releases For Car Owners
Loan On Your Car now provides vehicle equity releases to car owners. This is a vastly superior alternative to the logbook loan. Unlike the typical logbook loan, clients do not need to hand over their logbook or their car keys to access the loan they require. Instead, loans can be provided without this process which helps greatly reduce the carbon footprint.
Instead, the full application process is completed remotely. There’s no paperwork and the loan can be completed with an e-signature. The car can even be inspected through a video call, utilising a variety of popular apps including WhatsApp and Messenger. As well as providing a fantastic user experience, this completely minimises any paper processes. Every process is completed electronically and the business is keen to remove any existing paper processes from their business model as well.
As well as this, since inspections of the vehicle can be completed over a video call, there is no need for a vast number of visitors from agents. Again, this greatly reduces the carbon footprint caused by trips to meet with clients.
There are numerous other processes usually linked to these loans which require paper documents as well as inspections and visits. This includes credit checks and guarantors. Credit checks are used to ensure that a client does not have a poor history or being unable to pay back loans. A guarantor can be used to provide an extra level of security to the lender. Ultimately, if the loan is not paid, a guarantor will cover the cost. With Loan On Your Car, there are no credit check loans and no guarantor loans. This ensures that paper processes can be eliminated further and the carbon footprint is also reduced as well.
The ultimate aim here is to become a zero-carbon footprint lender. Potentially, Loan On Your Car could be the first zero-carbon lender operating within the consumer credit industry in the loan against a car sector.
With Loan On Your Car, you can now access the loan you need from a green lender. The company is paving the way for other businesses to transform their model and provide a green solution to clients.
A key element of the new model for Loan On Your Car is to rely on new technology to achieve green goals. With the latest tech, it is possible for businesses to deliver more to their clients and use less energy.
Going Green With A Fantastic Level Of Service
People may fear that a green company could lead to a poorer level of service with automated processes a key concern. However, this is not the case and Loan On Your Car are proving this, achieving fantastic five-star ratings from clients.
The business provides a dedicated account manager who guides clients through the process and helps them complete every step. This includes digital document verification with a highly efficient service. The business is even able to help ensure that customers are able to upload the necessary documents on time the right way.
Clients are also no longer required to make an appointment or take their car in for an inspection. Instead, every process can be completed with the personal tech that they already use on a daily basis.
Ultimately though the innovative use of tech, Loans On Your Car has joined the green finance initiative to provide loans in a way that is faster and greener with a brilliant level of customer care guaranteed.