Green Anything: Getting started with sustainable financing
HSBC’s worldwide efforts to become a more sustainable business includes tackling its own environmental footprint, but executives recognize the opportunity for the greatest positive environmental impact is by acting as a green champion with its customers.
We sat down with Dan Leslie, Senior Vice President and Country Head of Corporate Banking, and Scott Brown, Vice President & Market Head of Corporate Banking for HSBC Bank Canada, to talk about sustainable financing, green loans and how clients in Canada are approaching new projects with an eye on the environment.
Sustainable financing is still a pretty new term. What don’t companies understand about green loans and other “green” financial products?
Scott: We were the first bank in Canada to offer green lending products to our commercial banking clients, and I would say we were even a little bit ahead of the curve. But the struggles of the past year and a bit have really shown us that as Canadian companies look to build back better from the pandemic, they see a greater focus on sustainability as central to those efforts. Green loans can add additional credibility to a company’s sustainability efforts, and help them tell the story of their environmental initiatives to the market.
Dan: For me, one of the biggest misconceptions about sustainable financing solutions is that they’re reserved for massive projects alone, like building a 20-storey LEED Gold-certified head office or replacing a fleet of thousands of diesel vehicles with electric alternatives. These are definitely projects that qualify, but the size and scope of a project – and the size of the companies that are eligible for funding – are much more varied.
Are smaller projects eligible for green loans?
Dan: Absolutely. We’ve funded green loans as large as in the hundreds of millions, but many of these loans are for much smaller amounts. In fact, we’ve funded green loans as low as $200,000 for sustainability-focused projects.
The reality is that the size of the project and the size of the funding isn’t the chief determining factor of what is and isn’t eligible. The most important factor is that the funding be used for projects that align with the global Loan Market Association’s Green Loan Principles.
What are those principles?
Scott: There’s four key principles that a loan needs to meet in order to be classified as a green loan.
First, the proceeds must be used for an eligible green project – such as renewable energy, climate change adaptation or sustainable wastewater management. Secondly, borrowers need to be able to explain how the project they want to fund fits into their overall environmental sustainability objectives.
Third, borrowers need to be able to track how the funds are allocated to the eligible project to ensure they’re going towards the intended purpose. And lastly, the borrower needs to be able to report on the annual use of proceeds and the environmental impact of the project.
That seems like a lot of extra work. Why would a client choose this over a different financing avenue?
Scott: A lot of what needs to be done is really just good business practice to help the business to success – whether sustainability-related or not, businesses should be able to track and communicate the ways they’re using any financing tool. But there’s a lot of added benefit for a business these days by being able to say they’ve secured a green loan to support their projects and they can articulate the link of that to their corporate strategy and demonstrate a real world positive environmental impact.
There have been more studies than I could ever hope to list that show that consumers are increasingly seeking out and willing to pay more for products and services from sustainable brands. Sustainability is also becoming a differentiator for companies, and the drive to become more sustainable is leading to all kinds of innovation in product and service development.
Dan: And there are very real bottom-line benefits to becoming more sustainable, too. In many cases the organizations that put these measures at the centre of their business report that they have lower costs and increased labour efficiencies because of their efforts.
What are some unique projects you’ve seen financed with green loans?
Dan: The first green loan issued by HSBC Bank Canada really stands out for me. Vancouver’s Concert Properties were able to convert a $71.5 million construction loan for its Tapestry at Victoria Harbour development to a green loan because of its expected lower carbon and energy footprint of the building project and its LEED Gold certification.
I love this project in particular because Concert was very publicly committed to sustainability, and they literally put their money where their mouth is by becoming Green Loan #1 in the Canadian market.
Scott: My favourite has to be a project that is more uniquely Canadian than any anecdote I could come up with on my own. We’ve had a long-term client in the school board space, and they reached out to us last year. They had a facility with an ice rink and was looking to replace its decade-old, gas-powered unit with an electric Zamboni.
We were able to facilitate the purchase with a green lease, and they can now boast a rink where the only thing smoother than the ice itself was their green financing!
If I’m a business and I think I have a project coming up that makes sense for a green loan, how should I go about starting the process?
Dan: If you’re an existing HSBC Bank Canada customer that first step is as simple as contacting your dedicated Relationship Manager, who can help get the process moving quickly.
Scott: And if you’re not an existing HSBC customer? You can easily connect with us online or at 1-866-808-4722.
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