As the federal government moves towards its goal of net-zero emissions by 2050, the finance industry is also taking steps towards sustainability.
If you’re concerned about the environment, you might be wondering if your lender is too. There are several steps that lenders across Australia have taken towards sustainability. This means you have options when choosing finance that aligns with your ideals.
One of the most common green mortgage products is the green home loan. Also known as an eco-friendly loan, this mortgage is tailored to incentivise borrowers to invest in sustainable home improvements or eco-friendly properties.
The criteria for a green mortgage vary from lender to lender but generally, a green loan will offer you a lower interest rate for properties that pass some form of eco-certification or include eco-friendly upgrades. This can include:
- A rating of seven or higher according to the Nationwide House Energy Rating Scheme (NatHERS)
- A Residential Efficiency Scorecard rating of four stars or higher
- Conducting home upgrades of certain kinds (for example, installing real-time energy monitoring systems, installing hot water heat pumps, upgrading to LED lights for 75% or more of all lights)
In many cases, lenders offer levels of green home loans that will provide greater benefits to you the more criteria your property meets.
Sustainable investment portfolios
As a borrower, choosing a lender can be about more than just obtaining a loan; you are also giving the lender a vote on how your money is invested. By aligning yourself with a lender who offers and makes use of sustainable investment options, you not only access funds grown in sustainable portfolios but become part of a broader effort towards responsible finance.
Many lenders are shifting their investments towards environmentally-friendly assets. Several lenders include environmental, social and governance (ESG) performance measures in their decision-making.
ESG investors prioritise environmental and social responsibility, taking non-financial factors into consideration. If a lender is not investing in ESG portfolios, you can choose to show your disapproval by taking your business elsewhere.
By using your power as a consumer, lenders might think more carefully about making conscious corporate decisions, hoping it will lead to better business results in the long run. This is due to the relationships and trust built with customers, shareholders and communities, which can have positive ripple effects.
In some cases, lenders have even gone as far as pledging to not finance any new fossil fuel companies or projects. Lenders who have done this receive a Fossil Free Certification from Bank.Green, a global movement encouraging sustainable decision-making within the banking and finance sector.
With greenwashing becoming more prevalent, ensuring your lender is accurately reporting their ESG practices is important. This can be as simple as asking to see the lender’s most recent sustainability report.
In June 2023, the International Sustainability Standards Board (ISSB) released new sustainability standards. The Australian Treasury and Australian Accounting Standards Board have both signalled that reporting standards for businesses of a certain size and turnover in Australia will likely follow similar metrics to those set out in the ISSB standards.
For consumers and borrowers, this will help create a standard set of metrics by which to judge a company’s sustainability.
Carbon neutral operations
Some lenders are becoming increasingly aware of their own environmental footprint and are working towards correcting this. Introducing renewable energy at their offices, going paperless and supporting renewable energy projects are some ways in which lenders are working towards sustainability.
Additionally, as further way of offsetting their footprints, some lenders invest in carbon-neutral industries such as reforestation and eco-education.
Ready to make your home purchase eco-friendly and sustainable? Just Imagine Finance can help you explore green finance options. To get started, contact us on email@example.com or 0414 673 359.