ANZ launches green business loans at heavily discounted rate

ANZ NZ CEO Antonia Watson. Photo / Supplied

ANZ is the latest bank to offer discounted loans to businesses that want to fund green initiatives.

Businesses will be able to borrow up to $3 million at a floating rate of 3.85 per cent.

The rate is a 1.5 percentage point discount to its normal floating rate, for initiatives
supporting energy efficiency, renewable energy, sustainable land and water use
and building, renovating or purchasing of green buildings.

Borrowers will also be able to re-finance existing loans at the lower rate if they meet the criteria.

ANZ NZ chief executive Antonia Watson said Kiwi businesses understood the need to shift to more sustainable practices.

"Whether meeting changing consumer preferences or regulatory requirements,
reducing emissions or increasing efficiency, sustainability is integral to the way our
customers will have to operate in the future."

Geoff Ball, founder of Hagley Windows and Doors has invested heavily in solar power and storm water systems for its premises. Photo / Supplied

Future investment

ANZ customers Christchurch business Hagley Windows and Doors have invested significantly in solar power and storm water systems for their business premises.

Founder Geoff Ball said the company installed 2500 solar panels on a roof, reducing the power bill by a bit over 20 per cent.

Its next phase was to put a generator in and it was looking closely at Orion who were testing the use of biofuel in generators.

"I'd rather put a biofuel generator in than a diesel generator."

He said it was a big investment using new technology but he was looking to the long term.

Lorraine Mapu, ANZ business banking managing director, said for many firms cost was a barrier to investing in sustainability.

"As with any investment, making your business more sustainable comes with a
cost. We want to remove some of that cost barrier."

Mapu said the green loans would support agri-business customers wanting to invest in upgrading farming systems to preserve water quality, and for carbon sequestration through planting.

The loan was linked to the Loan Market Association's Green Loan Principles and loans will be independently reviewed by Ernst & Young (EY) to ensure they meet relevant principles.

To qualify, the loans must demonstrate a clear environmental benefit from the assets or projects.

The loans have a maximum term of five years and principal and interest repayments are required. The minimum loan amount is $5000.

Green shoots

ANZ is not the only bank to launch green business loans.

Last month Kiwibank said it would start offering businesses loans for sustainability initiatives at discounted rates from September 26.

Kiwibank's head of sustainable finance Tom Williams told the Herald interest rates on sustainable loans may be around 50 to 100 basis points lower than rates on regular business loans.

But those loans varied based on customer circumstances, such as credit scores, the type of loan sought, whether a loan was secured, and how long the business had been operating.

Kiwibank said it was committed to delivering $100 million in sustainable finance in 2023, and $2 billion by 2030. Williams said the goal was for about 10 per cent of Kiwibank's new business lending to be green every year.

In July, Westpac announced it was piloting sustainable agribusiness loans with three farmers.

The loans required customers to meet all parts of the Sustainable Agriculture Finance Initiative guidance.

This included to reducing emissions, improving long-term resilience and delivering more sustainable outcomes in terms of water, waste, pollution and ecosystems.

At the time, Westpac New Zealand chief executive Catherine McGrath said once farmers committed to meeting the guidance, they'd have two years to achieve that goal and would be supported with discounted loan pricing.

"Agriculture is a key part of New Zealand's economy and we provide high-quality food and produce to the world. It's important we take an innovative approach to lending in order to help our customers achieve their sustainability goals, while remaining productive."

She would not say how big a discount on loans farmers would get.

"We are not talking specifically about the commercials at the moment because that is one of the things we are working through."

BNZ also launched an agribusiness sustainability loan product for farmers in May.

The term loan offers interest cost savings for achieving environmental and social targets including: greenhouse gas reductions; eco-system protection; improved care for staff; protecting waterways; improving biodiversity; and animal welfare.

Dana Muir, BNZ's head of natural capital, said: "Reduced loan costs incentivise farmers to go harder and faster on environmental and social improvements while independent audits ensure the work is meaningful and contributes to a better future for New Zealand."

It is also working on options for green loans outside of agriculture.