Jul 21 '22

The Opportunities for Credit Unions in the Face of a Changing Climate

Taylor C. Nelms
Taylor C. Nelms
Senior Director, Research
Filene Research Institute
Subriena Persaud
Subriena Persaud
Research Associate
Filene Research Institute

Consumer expectations about the actions taken by organizations and businesses have shifted in the face of climate change. Credit unions have the opportunity to differentiate themselves in a crowded financial market by diversifying their product portfolio and expanding on lending business.

Taylor C. Nelms
Taylor C. Nelms
Senior Director, Research
Filene Research Institute
Subriena Persaud
Subriena Persaud
Research Associate
Filene Research Institute

“The transition to net zero is creating the greatest commercial opportunity of our age,” according to former Bank of England Governor and United Nations special envoy Mark Carney.

When we talk about climate change, we often emphasize the risks. And the risks are real—to people and the planet, first and foremost, as well as to businesses and the economy. But there are also profound opportunities for credit unions looking to grow by supporting their members and investing in building the resiliency of their communities. Those opportunities include adding new members by appealing to shifting consumer behavior. They include differentiating in a crowded financial services marketplace and doubling down on a value proposition that emphasizes local connections and community and member well-being. And they also include growing the credit union by diversifying the credit unions product portfolio and expanding its lending business.

Let’s explore that product opportunity, because it is substantial and growing. Indeed, because the market for “green” loans and other financial services is forming and changing quickly, this is a critical moment for credit unions to act, avoid missing out on earnings, and put themselves on a path to future growth.

Green Loans and Services

The global climate transition will require investment of between $6.3 to $9.2 trillion per year over the next three decades. That investment will need to go towards generating clean energy and electricity, overhauling and renovating infrastructure, constructing new homes and buildings, jumpstarting new modes of transportation, and much, much, more. This investment will be needed not only to reduce the amount of greenhouse gases emitted and get to carbon neutrality. It will also be needed to help communities become more resilient in the face of climate-related disasters and navigate the transitions necessary to adapt to a new economy.

Our partners at Inclusiv project that over the next 10 years, 20-30% of the credit union movement (over 1,750 credit unions) will offer over $5 billion per year in accessible, affordable green loans. In fact, according to Inclusiv, credit union green loan investment doubled in 2021, increasing to over $400 million. This is but a small percentage of the total green lending market, and so credit unions have plenty of runway to get creative and claim market share.

Two opportunities stand out:

  • Solar lending. The market for residential and commercial solar power is growing rapidly. According to the Solar Energy Industries Association, the total electrical capacity of solar power installations in the U.S. reached an all-time high of over 121 gigwatts—enough to power more than 23 million homes.
Inclusiv’s Center for Resiliency and Clean Energy provides training and support for credit unions looking to jumpstart and expand their solar lending programs. Since inception in late 2020, Inclusiv has trained 247 professionals from 140 credit unions, community banks, and loan funds through its green lending training and certificate program in partnership with the University of New Hampshire.


“At the Inclusiv Center for Resiliency and Clean Energy, we help credit unions build and scale clean energy and energy efficiency financing solutions, particularly among those credit unions that serve the most climate-vulnerable communities across the country. As financial cooperatives committed to investing in strong and healthy communities, credit unions are uniquely poised as vehicles for change.”Inclusiv
  • Electric vehicle financing. Electric vehicle (EV) sales are also growing rapidly, as new models come online and become more accessible to a broader market. Despite serious supply chain challenges, EV car sales spiked in Q2 2022, up 13% from just one quarter and more than 66% year-over-year. EV sales accounted for 5.6% of the total market in Q2 2022—a small sliver but up from 2.7% a year ago. There were almost 50,000 reservations to buy the new Ford F-150 Lightning—an EV pick-up truck—in the first 48 hours after sales opened up in May 2021, and the popularity of such new vehicles is growing. Says Ford’s CFO John Lawler: “The transformation is real. Electric vehicle demand is well beyond what we can supply.”

      Here at Filene, we did some quick back-of-the-envelope math to estimate how the boom in electric vehicles could impact credit union balance sheets. Assuming that credit unions take advantage of the opportunity, the EV financing market for credit unions could be nearly $360 billion by 2030!

      Further opportunities and early results

      These are just two product lines. There will be many other opportunities, from green mortgages and home improvement/retrofits to green savings and investment accounts. Credit unions should seize upon these extant and emerging opportunities in the lending market brought on by impacts of climate change.

      Many credit unions are already taking action. At Filene, we have been tracking outcomes of credit unions building out green lending lines and other products and services, and the results are impressive. VSECU, a Vermont-based credit union and leader in green lending, has experienced an annual growth rate in their green lending of more than 30% over the past five years. Currently, their green loan portfolio now accounts for more than 8% of total assets.

      Aligning with membership and strategy

      Of course, credit union leaders should think carefully about whether providing sustainability-related products and services is right for their organization. Incorporating or increasing green offerings should make sense and align with the demands, needs, and preferences of members. Assess your membership’s financial needs, consumption choices, and vulnerability to climate-related events. Look at your planned pathway for membership growth and engagement, and link product design to strategy.

      Nonetheless, it is clear there are market opportunities for credit unions to act on now in responding to climate change. As Cathie Mahon, President and CEO of Inclusiv affirmed, “our experience (and that of the network) has repeatedly shown that those CUs that engage and lean in on resiliency and clean energy are more likely to grow and be stronger and more sustainable.” Ultimately, by implementing sustainable products and services, credit unions can position themselves at the forefront of a growing market, but also positioned as leaders of environmental stewardship in the financial sector.