Green products: Coming to your bank in 2011?
We are now in an era where emphasis on environmental risks and sustainability has never been stronger. The information age has brought about unprecedented knowledge of the severity and implication of environmental degradation, while massive media coverage and proactive governmental policies have generated a high degree of environmental awareness among the masses in developed nations across Asia such as in Japan, South Korea, and Australia.
Consequently, financial institutions are starting to jump onto the green bandwagon, identifying and evaluating environmental market opportunities and offering green financial products. This not only allows them to play the corporate social responsibility card via the reconciliation of environmental issues with product offerings and raises their corporate image - but simultaneously crafts revolutionary ideas for eco-friendly ways to increase growth and competitiveness in the marketplace.
These green offerings provide banking customers the option to reduce the indirect negative impact their banking activities have on the environment, and range from green credit cards and auto loans to pro-ecology mortgages and sustainability-backed investment funds. The strongest advocates in Asia/Pacific for green financing arrangements are regional-brand names like HSBC (with their HSBC Green Credit Card), and financial institutions based out of Australia.
As a matter of fact, Australia has witnessed the introduction of green financial offerings such as:
- GE Money eco MasterCard, the first credit card Down Under with a reward program that provides cardholders with an automatic method to purchase carbon offsets;
- mecu's goGreen car loan, where interest rates are positively correlated according to how green a vehicle is based on greenhouse gas (GHG) rating associated with the vehicle type. Since inception of its goGreen auto loan in 2008, this credit union has seen a 45% increase in car loans; and
- Bendigo Bank's Generation Green Home Loan, which offers a 0.50% p.a. reduction over its current residential variable rate and no monthly service fee when retail customers build or buy a green home.
While IDC Financial Insights does expect demand for green products to expand in tandem with enhanced environmental understanding and awareness, many remain within nascent stage of implementation or even at development phases, and we would need to continue watching this space. Nonetheless, variation and innovation behind such green developments indicate that banks are genuine in wanting to integrate green financial products into mainstream banking.
Meanwhile, giving these eco-friendly initiatives a boost are government schemes like a newly minted one in South Korea that will offer "green credits" for consumers who embrace a low-carbon lifestyle. According to a new policy plan announced by the Ministry of Environment in January 2011, citizens who use green credit cards to buy eco-friendly products, or live green in ways like taking public transport would be rewarded with credits that can be redeemed for cash or used to lower utility bills. South Korea's national government advocating a green lifestyle can only mean that more of their domestic banks would get into the act.
What are your thoughts on the success of banks in integrating green incentives into mainstream banking? Are these mere flash-in-the-pan, or sustainable propositions? How can these environmentally-themed financial products remain financially viable in the long run?
To find out what else we have to say about this topic, have a quick read of our Perspective document: "New Frontiers in Green Revenue Generation" at: http://www.idc-fi.com/getdoc.jsp?containerId=FIN226459.