Green Finance Wholesale Guarantee needed to scale up green lending

The Finance & Leasing Association (FLA) is today stepping up its call for a Green Finance Wholesale Guarantee in response to the series of Government announcements on Net Zero initiatives.

FLA lenders are fully behind the Government’s green agenda – they want to provide finance that enables consumers and businesses to choose green options when they next upgrade their boilers, cars, equipment or plant and machinery – but to do that, the price needs to affordable, competitive and comparable to non-green options.

However, making this a reality will require Government to share some of the elevated credit risk attached to many green goods – they are new to the market and pricing their lifespan, depreciation or obsolescence can be difficult.

A Green Finance Wholesale Guarantee for funders of both consumer and business portfolios would signal to lenders and investors that the Government is aware that the timeframe for achieving Net Zero targets does not allow for credit risks to be absorbed as the market evolves naturally, and that they are willing to shoulder some of the burden.

Stephen Haddrill, Director of the FLA, said: “Credit risk is a problem that eases over time once there is sufficient data from which to calculate residual values, and an established secondary market in which to sell the used assets, but time is a luxury we do not have if the Government’s Net Zero targets are to be met.

“There is also a need for consistency on the part of the Government. Green Homes Grant. Launching initiatives is easy, conquering the attendant logistics is difficult – are there sufficient specialist fitters available to meet initial demand and scale up the rate of installations for the new grant system for domestic heat pumps launched today?

“Everyone can see the value and urgency of meeting Net Zero targets, but we need to make green choices easy – the finance needs to be competitive, the initiatives need to work, and the Government needs to be talking to the industries that can help deliver their green agenda.”