Bank Australia has launched Australia’s first green home loan, backed by $60 million in funding from the Clean Energy Finance Corporation (CEFC).
The CEFC is a statutory authority established under the Clean Energy Finance Corporation Act 2012 (CEFC Act), that invests in clean energy technologies, as defined in the CEFC Act.
The CEFC works in the following areas:
- Renewable energy: assisting in Australia’s transition to low carbon electricity
- Built environment: working across commercial, residential and community infrastructure
- Sustainable economy: investing in agribusiness, green vehicles and cleantech entrepreneurs
What is the Clean Energy Home Loan?
The Bank Australia Clean Energy Home Loan will provide prospective homeowners with an interest rate discount of 0.40 per cent on its Premium Package Home Loan, if they borrow less than $1.5 million.
This loan will be applied for the first five years of the loan term and is available for new builds or existing homes that have a star rating of at least 7 under the Nationwide House Energy Rating Scheme (NatHERS). This national performance-based rating system is administered by the Department of the Environment and Energy and rates the energy efficiency of a home based on its design.
For homes that do not have a star rating of 7, other ways properties can qualify include:
- Residential Efficiency Scorecard rating of 7 stars or higher (excluding the impact of installed/installing rooftop solar)
- Passive House Certification
- Green Star - Design & As Built v1.2 score of 8 points or higher on the credit ‘15 Greenhouse Gas Emissions’
Does the green loan apply to property upgrades?
Currently, Bank Australia is only offering the discount to the purchase of new builds or existing properties. However, the lender has announced it is planning to launch other sustainable finance options soon, including energy efficient property upgrades and high energy efficiency ratings.
Finance is already turning green
Bank Australia’s clean energy home loan is not the first to reward customers for acting sustainably when it comes to property finance.
The first green home loan was preceded by multiple lenders including Ratesetter, Police Bank and Community First Credit Union offering green personal loans. These loans, with rates as low as 5.99 per cent, reward customers who choose to purchase approved environmentally friendly products, including solar panels and hot water systems.
Investment firms are also getting in on the sustainable finance action, with $7 trillion dollar investment firm BlackRock recently announcing they would be switching their investment strategy to focus on climate action. Whilst this shift will only see BlackRock divesting from companies that obtain more than 25% of sales from thermal coal, and are therefore still investing in fossil fuels, it sends a clear message that climate risk is also investment risk.
The rise of the conscious consumer
From stainless steel lunch boxes to swimwear made from recycled ocean plastic, the past few years have seen consumers switching to sustainable brands that help them reduce their carbon footprint, whilst staying on-trend.
According to Australia Post, 49 per cent of global shoppers in 2019 were looking for retailers taking action to reduce their carbon footprint, and 50 per cent said they would choose to purchase from retailers that offset emissions from shipping. Retailers who act sustainably however, may also find themselves with higher profit margins, as Nielsen findings showed 38 per cent of consumers were willing to pay more for environmentally friendly products.
As household names like Jeanswest go into administration, boutique ethical brands charging more for the privilege are on the rise. This willingness to pay more for products that help the planet signals a shift in purchase behaviour and brand loyalty in a time when consumer spending is low. Whether financial services will capitalise on the sustainability trend by charging a premium on green alternatives is yet to be seen.