You might have heard the term green loan a lot recently. This is due to their increasing popularity and availability amongst the commercial real estate and banking sectors, but what exactly is a green loan, and how can you get one?
Green loans are investments from financial institutions such as banks that promote environmentally positive activities . Also known as green financing, this capital is used by commercial real estate and business owners to upgrade inefficient infrastructure to reduce carbon emissions and save money. There is already over 15 billion NOK in green financing available and much of this is accessible for buildings due to their status as high carbon emitters.
Not only is it the right thing to do from a climate change perspective, but because of new legislation and directives from regulatory bodies such as the European Union Council and Norwegian Government, it's now also smart and business-savvy.
All major Norwegian banks have signed an agreement to achieve Net-Zero emissions in their financing and investment activities by 2050, these include DNB, Nordea, Norges Bank, and Sparebank1. The way they aim to achieve this net zero target is by making more sustainable and environmentally friendly investments moving forward. For example, 99.9% of the carbon footprint from banks such as Nordea comes from financed emissions, and just under half of that is emissions from the commercial real estate sector.
Established by the European Union Parliament and Council in 2020, its goals are to direct investments towards projects that contribute to climate goals, increase transparency, and agree on what qualifies as "green." Practically speaking, this incentivizes banks to offer more green loans by providing clear guidelines to comply (such as Partnership for Carbon Accounting Financials), reducing climate change-related risks, accessing further EU support, and meeting growing investor and public demand for sustainable finance.
While they may have similar objectives, they're not the same. Both energy efficiency and green loans are designed to help the lendee's properties or businesses become more sustainable and environmentally friendly. However, energy efficiency loans are designed to directly improve the efficiency of homes, or buildings; like upgrading insulation for example. Whereas green loans have a much broader scope and can also include other ecological, sustainable, or health-related projects; such as recycling initiatives or green building construction.
It's a more complicated question than you might think, and the answer is… maybe.
Let us explain.
When applying to a bank for green financing, they'll assess several criteria such as; the environmental effects the changes will result in; how well the financing is accounted for and monitored by the business; and verification of the effects of the changes when they happen.
Some examples of projects that may help you to qualify for a green loan are:
All of this may strike you as very complex and overwhelming, but that's where we come in.