Published : 4 years ago, on 11/12/2020

By Paul Noble, Chief Commercial Officer at Tandem

Green finance is a term that can be used to describe a two way interaction between the financial services sector and our environment. An example could include a bank providing the financing for low carbon or climate resilient projects such as reforestation or carbon capture. The promotion of green finance simply helps ensure that such green initiatives are prioritised over business-as-usual investments that risk perpetuating the unsustainable growth patterns of the past.

The concept of “green finance” is not a newly coined term, it has been around for over a decade, but it was the signing of the Paris Agreement on climate change in 2015 that introduced the idea to a wider audience. As climate change remains a subject of debate for many politicians around the world, investment is flowing into green initiatives at an ever increasing rate, and the green agenda and green finance in particular is gaining more and more attention in the media worldwide. In the last few weeks alone, US President Elect Joe Biden announced his appointment of John Kerry as climate tsar, and UK Prime Minister Boris Johnson announced his 10-point plan for a green industrial revolution, extended the timetable for Green Home Grants and launched his Green Recovery Fund to build back greener from the coronavirus pandemic.

Despite the international social, political and economic backdrop becoming increasingly green-centric, the emphasis on retail or consumer green finance has been limited to date and the power of the retail individual has not yet been harnessed. And this could have the greatest sustainability impact.

There are nevertheless already a number of ways that consumers can improve their green credentials; through choice of energy supplier, day-to-day spend decisions and choice of retailer, investment decisions including pensions and residential decisions including home purchases and home improvements.

2020 has seen our daily lives turn upside down. Coronavirus has had some devastating consequences around the world but it has also made people much more aware of their environment and surroundings. Fish were seen in the Venice canals again. Children in Northern India were able to see the Himalayas for the first time due to the drop in air pollution. As we all anticipate the results of global vaccine trials and hope for a return to some semblance of normality, let’s not forget these opportunities for positive change and the opportunities for financial services to do good in a “post-corona” world.

The financial services sector will have to rethink and refocus on the issues that matter most to their customers. And for digital financial services, that due to the pandemic are increasingly attracting customers across all age demographics and not just millennials and Gen Z, green will be that issue.

Businesses that have already made an effort to develop their green credentials are now seeing the benefits, with consumers already citing environmental impact as a key factor in their purchasing decisions today. Mortgages, savings, current accounts and loans are all starting to turn greener too and it is likely that the banks that present a more environmentally responsible offering to their customers will also see an increase in the appetite for those products and services.

There has never been greater potential for green banking pioneers to lead the way to a better and more sustainable future.  Tandem Bank was founded with the mission of helping to solve real people’s money problems and so this notion of sustainability – financial and environmental – has been at the heart of our business from day 1.

Tandem recently acquired established green loans business, Allium Lending Group, to support this mission and accelerate our journey to building the UK’s first green retail bank. Allium specialise in financing energy efficient home improvement projects, from energy-efficient boilers and double glazing, to solar panels, heat pumps and home charging stations. Together we will be able to offer environmentally conscious consumers an intelligent digital solution using open banking and AI to better understand their environmental impact together with a full proposition of green spend, save, borrow and invest solutions so they can directly contribute to reducing their environmental impact. A new green instant access savings account and green mortgages are already planned for next year – watch this space.