ANZ New Zealand is pitching a new “green” business and agri-business loan discounted by 1.5 percentage points from its standard floating business rate.
ANZ’s business term loan floating base rate is currently 5.35% and the floating green loan is currently at 3.85%. The green loan will track the standard rate at a 150 basis point discount as interest rates move.
The new green loan isn’t the only such product in NZ, even within ANZ bank, but it is the first advertised loan linked to “Green Loan Principles” published by the UK-headquartered Loan Market Association (LMA).
Under those principles, a green loan has to be credited to a dedicated account or otherwise tracked by the borrower to protect the loan product’s integrity. It also codifies the types of activities eligible for the loan.
The ANZ bank’s compliance with the LMA’s principles is reviewed by Ernst & Young.
ANZ New Zealand business banking managing director Lorraine Mapu said that following the international standards would help businesses sell their products to the world – “selling into, say, a supermarket chain offshore”.
There is a very strong global demand for buying from businesses with sustainable credentials, she said.
“If you go to Europe, it’s around being able to define your business as having sustainable practices.”
The loan scheme has been kicked off with five eligible categories – energy efficiency, green building practices, sustainable land, sustainable water, and waste management.
Mapu said there has been strong customer interest in green loan products.
“We’re proud of the fact that we’ve been able to stand this up and we now have a full suite of sustainable products for all our customers in the bank.”
There are strong processes including spot checks and annual reviews with customers to ensure the loans were being used for their stated purposes, she said.
Examples of business development activities include solar power installations and improving energy efficiency, such as the installation of heat pumps, biomass boilers, double glazing, insulation and lighting.
Eligible water use projects revolve around improving water quality, and include structures for keeping livestock out of water bodies. Sustainable land use activities include afforestation, reforestation and preserving the natural landscape.
However not all forestry spending is equal, and the bank is excluding “permanent exotics that are not intended for harvest at maturity” from the loan scheme.
It is also excluding planting projects that change a property’s land use by more than 15% by area. Mapu said that criteria are related to concerns about maintaining NZ’s productive land.
A spokesperson for the ANZ said the loan scheme is designed to support the right tree in the right place and to support projects that improve water quality and carbon sequestration.
“Projects include riparian and wetland plantings, mixed species and exotics, noting there are certain controls over exotic plantings to ensure a sustainable and measured approach to land use change,” the spokesperson said.
“We see our loans supporting businesses wanting to begin their transition to a more sustainable business model where plantings will be a part of a fully integrated business model to support a more resilient business, rather than exclusively a permanent carbon sink.”
