Know everything you need to know about green credits

Know everything you need to know about green credits
4 min read

Environmental conservation, sustainability and eco-friendly models have been one of the fastest growing trends globally.

This has led companies from multiple sectors to develop products and services aimed at serving the growing demand for projects aligned with these objectives.

And the case of banking is no exception, as it has developed loans for green businesses. Do you know them? Below we explain what they consist of and what their characteristics are.

Companies increasingly environmentally conscious

According to statistics from Trucost, a research company that is part of the prestigious market research firm S&P500 Global, in 2018 there was a 33% increase in the number of firms that publicly disclosed carbon dioxide emissions resulting from their processes. business.

On the other hand, companies have seen increased pressure from their own consumers to set “green” goals. That is to say, that they have the firm purpose of reducing water pollution and reducing their emissions in the short, medium, and long term.

Finally, the survey emphasizes that more than 68 stock markets in the world have also incorporated environmental requirements for companies that wish to list financial instruments in said institutions, in order to encourage more green initiatives by the largest companies on a global scale.

What is a green credit and who can apply to these credit instruments?

Green loan are loans for businesses whose specific purpose is to finance initiatives and projects that contribute to the preservation of the environment or that transform a certain productive activity into a self-sustaining process, that is, with low environmental impact.

These business loans have a specific requirement that to be approved, their environmental impact must be certified by a local authority or some independent body.

According to the 2017 Green Finance Latin America report, financed by the World Bank, in which 101 banking institutions in 18 countries of the continent were surveyed, there is a growing interest from banks in expanding their portfolio of green products in the near future, due to the rise of these initiatives in the southern hemisphere.

According to the study, 49% of the banks surveyed already offer some type of product aimed at this segment while, of the rest that do not currently offer them, 88% of the institutions affirmed their interest in incorporating these products and services into their briefcase.

Additionally, 35% of the Latin American banks that already offer these types of loans for green businesses indicated that their portfolios grew more than 50% in the last year, while 31% indicated that their portfolios grew between 1% and 50%, showing evidence that there is a latent and growing demand from this segment.

Among the main types of green products and services offered by banks are: green business loans, green mortgages, green leasing, green credit cards, and green business financing.

Each of them works in a similar way to their traditional counterparts, however they are designed and focused specifically for this market niche and require some type of certification from the applicant that qualifies the project as "green".

It should be noted that although agriculture has emerged as the most important sector within loans for green businesses -due to the importance of this industry in the continent- other sectors have also gained ground, such as sustainable construction, management waste and the development of renewable energy.


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