Businesses 'dared' to embrace circular economy as ING prepares for new era of green finance
EXCLUSIVE: Companies should be ready and willing to shake up their business models in favour of the circular economy, with Dutch multinational banking group ING indicating a strong desire to provide more financial support for the low-carbon movement.
Speaking exclusively to edie, ING’s global head of sustainable finance Leonie Schreve said she wanted to see more firms taking bold steps towards the circular economy as the bank is looking to revamp its existing funding portfolio as part of a transition to longer-term, sustainable financing.
“Businesses need to have the guts to look and reflect on the finance sector models and new business models, even if it disrupts their own operations,” Schreve said. “We need to look at these longer and more sustainable models because it is better businesses. Financial banking dares them to take that move to a longer, strategic vision.”
Schreve noted that ING – which has already acquired almost £24bn in sustainable finance with companies it defines as ‘forward-thinkers’ – is working around the clock to introduce new businesses that are using closed-loop business models into its portfolio.
Risk & reward
Schreve ultimately believes the circular economy offers "huge potential" to the financial markets. In its recent ‘rethinking finance in a circular economy’ report, ING estimated that closed-loop business models model were forming a growing market which could generate an additional 4% growth in value over a 10-year period.
With the Ellen MacArthur Foundation recently valuing the EU circular economy at €1.8trn, ING is upping its efforts to make inroads into this sector - the bank issued its first £1bn-plus green bond last year and Shreve is constantly in dialogue with green businesses old and new to accelerate the transition.
“Obviously we have to be conservative with funds, and the circular economy isn’t without its risks,” Schreve said. “But we need to have an antenna for disruptive business models that we aren’t necessarily covering right now, because a lot of the models are really good concepts.”
“We believe that the circular economy will be a big market for us in the future and a lot of our current clients are moving in that direction. But for them to get there it requires change - you need to disrupt your own business and this will have consequences on balance sheets, but businesses need to have the guts to move in the right direction."
ING has previously stated that the financial industry will need to undergo a seismic shift in culture to support these new models - a statement that the bank’s global head of lending, Christopher Steane has experienced firsthand.
Speaking at ING's 'financing the circular economy' conference in London last week, Steane said the circular economy has required additional capital loans which not only put pressure on credit ratings but also raise issues about placing a price on the residual value of a ‘looped product’.
“This isn’t all hot air - the transition to a circular economy is happening,” Steane said. “The efforts of large business and new financial players provide solid proof that this is a great model. It won’t be a case of whether or when, but rather how we make our economies more circular.
“We believe that sustainable business is better business. We have our own data to provide sustainability information for the last two years on every single proposal that has been put through our extensive lending activities. All of these have been subjected to a filter for sustainability.”
Steane went on to reveal that, currently, around 17% of ING's portfolio has been given the ‘green seal of approval’ and that he is constantly reminded by his CEO to increase that percentage. With the historic Paris deal in place, Steane believes that he will have no problem accelerating the transition to green finance.
"There’s now a demand from society on the financial industry to support the low-carbon movement," Steane added. "COP21 estimated financing of trillions of dollars and we want to contribute. More and more companies are getting serious about closing loops and finance can be a catalyst.”
But as the global push towards a circular economy begins to take shape, both Shreve and Steane are fully aware that ING is unable to drive the movement on its own. As well as calling for an international carbon price to drive low-carbon investment, Schreve called for a much greater emphasis on cross-sector collaboration.
“With resources becoming scarce, innovative solutions like the circular economy are desperately needed," she said. "The finance sector is making moves, but we’re not the only ones who can champion this - it needs to be a joint effort.
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