Are Banks the New ESCOs

Have Banks Become the new Energy Service Companies?

Energy efficiency is making its way into all sectors, and banks are now developing solutions to be part of the energy transition process.

The targets set by governments and institutions to reduce emissions and preserve the planet have a direct impact on the energy sector. You may already know this figure, but we would like to remind you that one of the objectives of the Paris Agreement is to reduce the emission of polluting gases by 40% compared to 1990 by the year 2030. The European Union wants to go even further and achieve a 55% reduction.

These global objectives, together with the liberalised market, are generating a multitude of changes in the energy sector. That’s the case with the introduction of new energy service companies, self-consumption projects or energy communities, which we talked about last week.

In this article, we look at how banks are finding their niche to become active in the energy sector. Read on to find out more.

The Role of Banks in Energy Efficiency

Companies in the energy sector, whether they are service companies (ESCOs), retailers, installers, etc., have a long way to go and still lots of work to do. This is good news for business and employment figures. However, at times the willingness to do so can conflict with reality if there are not sufficient resources to finance energy projects.

Banks and financial institutions are there to fill the gap.

As part of their efforts to be more committed and respectful of their environment, banks have launched sustainability strategies in recent years, including energy services. 

And what motivates this new strategy?

One of the banks’ priorities is to invest in projects where they can secure a return on their investment (ROI), and renewable energy is a growing sector.

For example, the European Investment Bank (EIB) is moving away from investment in fossil fuels and increasing its investment in renewables and energy efficiency. Between 2015 and 2020 the bank allocated €21 billion to renewable energy projects.

Several agents will benefit from the investment in energy efficiency projects including:

  1. Installation and energy service companies

It will allow them to grow, create quality jobs and generate demand for renewable energy solutions.

  1. The end-user

They can save part of the initial installation investment and choose among a wider range of options to be efficient.

  1. The bank itself

Such investment will contribute to the bank’s Corporate Social Responsibility (CSR) or ESG and thus, improve its image. An institution’s commitment to sustainability and environmental causes is expected by modern customers, who won’t hesitate to switch to another bank meeting their needs. 

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How to Promote Energy Efficiency in your Bank and Reduce your Carbon Footprint

If you are familiar with the banking sector, you may already know that banks have their own challenges in terms of energy efficiency (e.g. increasing efficiency in their branches and offices) as we discussed in this article on the main energy challenges in the banking sector.

So before you start offering efficiency-related services to customers, it is important to promote energy efficiency in your offices and branches and reduce their carbon footprint.

Implementing an energy management system will help you to carry out an initial audit and establish efficiency measures. In addition, defining an internal awareness strategy for your employees will also be key to ensuring that the measures are effective and that your bank is more efficient and sustainable.

Opportunities exist for banks to move further into the energy sector and contribute to the expansion of renewable energy and energy efficiency. Let’s take a look at how banks in the UK are integrating energy efficiency into their service portfolio.

What are the UK’s Main Banks doing About Energy?

The main banks in the UK already offer some form of energy services, either through consultancy,  installation companies, financing or public subsidies. In all cases, financial institutions have partnered with energy service companies to develop joint offers and combine investment and implementation.

Why? Banks are established companies that can help promote and accelerate energy efficiency. Turning to them for advice and information on energy efficiency is easier than contacting energy service companies (ESCOs) for the end customers.

Partnerships between the two worlds make life easier for companies that want to implement energy efficiency and energy-saving measures. For example, a company seeking money to renovate its facilities can obtain both financing and efficiency recommendations from the bank directly, without having to make separate arrangements.

These are some of the banks’ energy initiatives in the UK:

The second-largest bank in the world shared its annual report focused on objectives and accomplishments toward more sustainable practices, and involving all actors, including its suppliers that must adhere to strict environmental management principles. Some achievements also include a decrease in GHG emissions by 50.3% compared to 2019 and $126.7bn of sustainable finance provided since 2020. For clients who consider sustainable investing, the Group offers two routes: ready-made portfolios or build your own. Finally, businesses have the opportunity to get a suite of green products including loans, financing and credit facilities.

The institution’s ESG strategy is focused on environmental responsibility throughout its supply chain. To date, Barclays has facilitated a total amount of £193.3bn of social, environmental and sustainability-linked financing as per its annual report. The Bank offers a wide range of solutions including Impact Investing, where clients can tackle environmental issues by investing in companies generating positive outcomes. The bank also offers Green Home Mortgages at a lower rate as well as Green Deposits, Green Trade Loans and Green Bonds. Finally, the shareholders have a “say on climate” to feel more involved in the transition.

The group wants to create value and thus, is committed to managing ESG outcomes. Natwest has been a signatory of the UN Sustainable Development Goals for two years. It was the first bank in the UK to issue €1 billion affordable housing social bonds. In 2020, the Bank funded “Innova” a private equity-backed renewable energy generator, a step towards its commitment of £20bn of funding for climate and sustainable finance. 

The British bank was founded in 1872 with the desire to challenge the status-quo both ethically and environmentally. In 2021, the Bank was rated “Best UK High Street Bank for ESG”. Some of the main energy-efficient objectives reached by The Co-operative Bank last year included the reduction of their GHG emissions by 18%, the reach of carbon neutrality (and beyond), the essential sourcing of electricity from renewable supplies, the issue of PVC-free credit cards, the reduction of paper use among others. In addition, they signed the UN Principles for Responsible Banking to align their strategy with the Sustainable Development Goals SDGs and the Paris Climate Agreement.

The Bank of England presented a clear sustainable strategy composed of five main goals. They include a transition to Net-Zero emission to be aligned with the UK government’s strategy, the delivery of a G7 agenda focused on climate change and the guarantee of the financial system’s resilience thanks to the launch of the Climate Biennial Exploratory Scenario (CBES). The BoE also adjusted its Corporate Bond Purchase Scheme (CBPS) to make it greener. 

Banking groups do not hold a monopoly on financing renewable energy and energy efficiency projects. Other entities are also showing initiatives to be agents of change. For instance, Triodos Bank, established in 1980, operates in several countries and helps individuals and companies finance energy transition projects. Virgin Money offers green mortgages with advantageous conditions and plans to plant 100’000 trees on top of these carbon-cutting plans. Finally, Lloyd Bank launched an energy efficiency app and reduced its emission by investing in electric vehicles.

Have you ever considered implementing energy services in your financial institution or bank? Are you looking for a way to expand your services and build loyalty among your end customers?

Do you want to take action and be an active participant in the energy transition and promote sustainability through energy efficiency?

To manage all these projects, an energy efficiency system (EMS) such as the DEXMA platform can help by comparing existing data and making predictions of energy production and consumption, among other things.

Through DEXMA Detect, you will be able to assess the energy-saving potential of your facilities and perform a virtual audit without having to access the sites.

In addition, to offer the best service to your clients, you will be able to share regular and customised reports, with clear visual elements to facilitate their understanding. They will also be able to access real-time dashboards, without having to register on the platform, to guarantee the transparency of the project and their participation.

If you have energy projects in mind and want to talk to our experts at DEXMA, please contact us here.

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