Green Financing & Financing Green – Can We Do Both?
by Joel on December 19th, 2008
Last month, I had the distinct pleasure to attend a unique conference in the truly world-class city of Berlin. The conference, organized by KfW, a German Development Bank, focused on how to “green” the financial services industry around the globe – from microfinance institutions focused on the very poor to the larger commercial banks targeting small and medium enterprises in more affluent areas. Particular attention was focused on the innovative work being done on financing of energy efficiency and alternative energy projects throughout the world. The participants voiced a near unanimous concern that the current financial crisis had greatly hindered on-going efforts to green the banking sector and that decisive action was needed in the next few months to maintain the momentum.
The discussion raised a fundamental question about the best strategy for achieving the dual objectives of ensuring adequate financing for green efforts and institutionalizing green lending in the commercial banking sector. My take is that due to the compressed timeline for reorienting the economy away from fossil fuels and given the depth and breadth of the financial crisis, these two objectives may no longer overlap. I am not convinced that we have the time to incrementally incent existing banks to increase their green lending – the hurdles are simply too great to get them to do so and time available way too short. Instead, I think we will need to look seriously at capitalizing (new or existing) institutions focused on the green sector and hope that their efforts and outsized returns lead more established entities to enter the market later.
Certainly, in the US, we have seen how institutions focused on developing financial products for new markets have transformed banking. I need only look outside my window to see the results. When ShoreBank was founded, no banks thought of low wealth areas as ideal places to grow and thrive. Today, ShoreBank faces increasing competition from mainstream banks in these communities and we now have commercial banks and other types of financial intermediaries on nearly every corner surrounding our branches. Our success was a catalyst for a wholesale change in the overall industry. I believe a similar pioneering effort is now needed within the green sector.
Tags: community development, energy conservation loans, financial crisis, green banking, ShoreBank, triple bottom line
[...] The conference, organized by KfW, a German Development Bank , focused on how to “green” the financial services industry around the globe – from microfinance institutions focused on the very poor to the larger commercial banks targeting …[Continue Reading] [...]
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[...] Green Financing & Financing Green – Can We Do Both? | ShoreBank Voices [...]
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