“Green Tagging”, if you cannot measure it, you cannot improve it

[Elena GCPF Expert Energy Specialist | ResponsAbility - GCPF | CH]

“Green tagging” is a way to better understand borrower behavior.  By capturing information related to green[1] aspects, we can use it to scale up sustainable finance. Measuring the key parameters related to energy consumption helps us understand a critical component of any budget constraint, as energy is a transversal aspect in everybody’s life or business.
Personally, I like to see this concept related to an aphorism from William Thomson[2]: “If you cannot measure, you cannot improve it”. If we cannot measure the data related to energy, we cannot understand nor improve the energy cost structure faced by our clients, and the subsequent needs, risks or interests that they may have.
For SME or corporate clients, for example, having an IT program that provides benchmarking between companies about energy cost resilience[3] or energy intensity[4], the bank could understand their exposure to a change in the energy regulation and better adapt their risk rating. On the other hand, this tool could also be an incentive for companies to integrate energy efficiency in their operations, to improve their company rating profile and enable access to funds.

How can you benefit from green tagging?
Different reports capturing opinions from leading European banks agree, among others, on two common client-related consequences of green tagging: 1) capability to better manage risk and 2) improvement of customer up-take.
Capturing these positive outcomes and integrating them in your bank operations, can impact your portfolio with an increase of the repayment capacity and a reduction in default rates. All these factors are key information to create innovative financial products, provide better conditions to your clients and help you differentiate from your competitors.

Figure from: “Green Tagging: Mobilising Bank Finance for Energy Efficiency in Real State”, find report (here)

 

Interested in ideas or possible applications?

If you are interested in this topic, you want to brainstorm or share ideas, please do not hesitate to reach any of us – see picture below to put faces to the carbon and energy specialists team. We will be happy to support you to benefit from green tagging!

Carbon and Energy Specialists team 

Other interesting case studies can be found in the report G20 Energy Efficiency Investment Toolkit – Case Studies (here) or in the G20 Energy Efficiency and Investment 2019 stocktake report (here)

[1] Environmental and climate related
[2] Irish mathematical physicist (1824-1907), often referred as Lord Kelvin

[3] How vulnerable is your client to changes energy prices
[4] Consumption of energy per unit of product or revenue generated

Eva Tschannen

Astrid Boerner

[Author]

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