MADISON, Wis.-A new report issued by the Filene Research Institute has found that loans made to foster environmentally friendly projects are profitable for credit unions and attract financially strong borrowers.
The study, "Finding Sustainable Profits: Green Lending in Credit Unions," found loans made for energy efficiency, alternative energy or other environmental purposes spur membership growth and lead to new growth in solidly performing loans on the balance sheet.
The research also found many credit unions are partnering with local utilities, vendors, and nonprofit organizations to offer their members green loan products. These partners assist the credit unions in marketing the loans, and, in some cases, they help subsidize the interest rates or provide other forms of financial assistance that lower costs to members.
Filene said the report, by researcher W. Robert Hall of Hall Associates Consulting LLC, is based on an extensive online survey and a series of in-depth interviews. "These findings make it clear that there is a solid business case for credit unions to expand their focus on helping their members cope with the ever-rising costs of energy to heat their homes and to get the most out of each gallon of gasoline," said Hall.
"We continue to be interested in the implications the sustainability movement holds for credit unions," said Mark Meyer, CEO of the Filene Research Institute. "This report is the first systematic look at green lending among credit unions, and we're impressed with how many credit unions are reporting profitable portfolios."
A Need Is Identified
Over the last several years, governments and nonprofit organizations have identified the need to increase access to credit for homeowners and businesses to make energy-saving improvements. A key component of most strategies has been trying to get financial institutions to offer reasonably priced green loans that will enhance U.S. energy independence, address environmental concerns and stimulate the creation of new green jobs.
"Now that we've found green lending is profitable for credit unions of all sizes, it is time to bring these findings to financial institutions of all types," Hall said. "These loans can be particularly important to smaller credit unions in expanding their loan portfolio and attracting new members," he added.
The report concludes, "Moving forward, credit unions should explore 'going green' not just as a cost cutting strategy, but also as a business growth strategy."
"In the future, with energy costs expected to rise from the fuel pump to the electrical outlet in people's homes, well-structured and marketed green loan programs have the potential to become as important as car loans have been in the past to credit unions," said Hall.
