Wednesday, March 14, 2018

The NEW Path to Cash - Do This or Else


If you are running a business in 2018 and you don’t yet have a Corporate Responsibility Program / Sustainability Program, then you are probably leading your business to a slow death. 

The top five banks in the United States have publicly committed over $645 billion in financing to companies and technologies that are clean, green, environmentally and socially responsible, low-carbon and sustainable.  That is the new barometer for low risk.    These banks not only have invested in expanding their own programs but are narrowing their investment outlay to borrowers who match up with the core characteristics of ESG (Environmental, Social and Governance) data.  Not only that but these loans are the lowest priced available as part of their incentives.

What does this mean for you?  It will become more and more difficult to get low-rate loans if at all as this trend continues.  The result is if you need cash, and as a business owner, there are always times when you will need cash, you may not be able to get it if you don’t show that you are working toward sustainability.

Bank Sustainability Financing:

Here are what the top five banks are doing:
  1. JPMorgan Chase has allocated $200 billion in “clean financing”.  They will finance client projects and companies to facilitate new energy, transportation, waste management, water treatment and technology innovations.
  2.  Since 2007, Bank of America has provided more than $70 billion in financing for low-carbon and sustainable business activities. As part of their second commitment established in 2012, and increased in 2015, they will provide $125 billion in capital, along with significant intellectual capital, to develop solutions to climate change and other environmental challenges.
  3. Wells Fargo continues ton invest in supporting a lower-carbon economy.  Since 2012, they have invested and financed more than $70 billion in renewable energy, clean technology, “greener” buildings, sustainable agriculture, and other environmentally sustainable businesses. They seek to finance and support businesses that are developing solutions to mitigate the impacts of climate change and leading the way to a more sustainable future.
  4. Citigroup has been helping their clients contribute to climate and environmental solutions for more than 10 years. In just three-and-a-half years, they have financed and facilitated $53.3 billion in environmental finance transactions, meeting more than half of the $100 Billion Environmental Finance Goal they set in 2014 to lend, invest and facilitate $100 billion over a 10-year period. That builds on their previous $50 Billion Climate Initiative, which they achieved over the prior seven years.
  5. Goldman Sachs is targeting $150 billion to finance and invest in companies that promote clean technology and renewable energy, and they are committed to helping to develop market-based solutions to environmental challenges. 
 
Maybe you work with a smaller local bank in your community and don’t think you will need to be concerned about this.  Be aware that smaller community banks are beginning to offer similar programs to serve their local businesses and community.  Green Bank in Houston has invested $275 million in assets and is building a clientele of environmentally minded companies and individuals.  One Earth Bank was formed in Austin to have a sole focus on sustainability. 

Alpine Bank in Colorado offers consumer and business loan programs to help their customers make energy and resource improvements.  They will take ½ percent off their loan interest rate for purchases of fuel-efficient vehicles with a minimum of 40 MPG and rate-discounted loans for fuel-efficient business vehicles. 

Sustainability Investment Funds:

Not only are banks issuing money to environmentally conscious businesses, but they are directing their clients to invest in sustainability funds.  In fact, ESG (Environmental, Social and Governance) practices is now accepted as the mainstream approach to investing.  Sustainalytics and MorningStar are the global leaders in researching ESG companies to provide data, ratings and information for investors of top sustainable mutual funds.    Barron recently selected 203 U.S. large company, actively managed funds with the most sustainable portfolios and ranked them by one-year returns.  Of the 203 funds studied, 37% beat the S&P’s 500 index 18.6% return. 

Private investors and venture capital firms see these funds and firms as offering the highest returns and will continue to seek like-minded entities in which to invest.  

Are You Ready to Act?

As you can see the financial world is focused on things that matter environmentally, socially and how companies govern themselves.  This is not a trend but a new reality.  When companies fully invest in sustainability they become transparent and a much lower risk to investors, lenders, employees and all stakeholders. 

The good news is that if you have been considering looking into doing environmental upgrades to your facility you can find low-interest money with which to do it.   That access to cash combined with applying any state and federal rebates can accelerate your return and get you on the path to establishing yourself as an environmentally and socially conscious business.

The bad news is if you don’t take the steps toward sustainability, your business won’t last.  Does this concern you enough to get started now?  Has anyone had a recent experience while pursuing capital where you were asked about your sustainability initiatives?  




Sources:
https://www.jpmorganchase.com/corporate/Corporate-Responsibility/environment.htm
https://about.bankofamerica.com/en-us/what-guides-us/environmental-sustainability.html
https://about.bankofamerica.com/en-us/what-guides-us/environmental-sustainability.html#fbid=YveXG9WU-0t.
https://www.wellsfargo.com/about/corporate-responsibility/environment/
http://www.citigroup.com/citi/sustainability/
http://www.citigroup.com/citi/sustainability/data/Sustainable-Growth-at-Citi.pdf?ieNocache=176
http://www.goldmansachs.com/our-thinking/new-energy-landscape/low-carbon-economy/index.html
http://www.goldmansachs.com/citizenship/environmental-stewardship/
https://www.environmentalleader.com/2008/01/green-bank-to-open-in-austin/
https://www.alpinebank.com/personal/personal-loans/green-lending.html
https://www.barrons.com/articles/the-top-performing-sustainable-funds-1507350787
http://online.wsj.com/public/resources/documents/TopSustainableMutualFunds.pdf

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