ESG (Environmental, Social and Governance factors) will be a key concern for banks in 2022, reflecting increasing pressure from the public, governments, regulators, and institutional investors for banks to address sustainability head-on. ESG matters to the next generation of financial services consumers, and they aren't afraid to speak out.
Of course, funding sustainable products can be challenging. It’s hard to predict their residual value, which is what makes them fundable – or not.
"That said, these sustainable businesses should be able to access funding in the same way as any other business,"
says Yvonne Balfour, Chief Marketing Officer at Ultimate Finance.
Government support for a ‘green finance guarantee’, to help mitigate the elevated risk of products with uncertain lifespans of depreciation and obsolescence, would encourage lenders to back these businesses. Business groups are already lobbying for this to be put in place. And once the high street banks start to offer products to fund the transition to net zero, it will pave the way for all lenders.
The social aspect of ESG shouldn't be overlooked. Banks will need to be more supportive of employees and more flexible about working patterns. "Moving to hybrid working, that works for both the business and employee, is going to be the new normal, and I see that coming together in 2022,"
This article is based on Business Finance Predictions 2022, a Trade Ledger report, in which a range of industry experts share their insights into what lies ahead for 2022. In addition to digital transformation and tech partnerships, find out their views on:
Look out for more articles in this series, or download the report now.