W. Robert Hall
Hall Associates Consulting
Report Number 249
Credit unions that ask how they can join the green revolution often make a quick leap to green lending for cars, home improvements, energy savings, and more. Lending is, after all, credit unions’ core business. But, to date, there has been little data on green lending. This report moves from the theoretical to the practical and finds that more and more credit unions are discovering that lending for green purposes is not only a good thing to do but also a smart thing to do. It is good business in its own right. The loans are profitable; they attract financially strong borrowers, spur membership growth, and lead to new growth in solidly performing loans on the balance sheet.
What is the research about?
This report shows that a growing number of credit unions are offering loans to their members that are specifically focused on helping them make energy-saving improvements to homes, businesses, and transportation. In some cases these green loan programs have been motivated by a concern for the environment, and in others the focus has been on helping members or increasing loan applications and spurring new membership growth. The data are limited to a sample of credit unions, but they are directionally useful. The survey data on which this report relies represent responses from dozens of credit unions larger than $50 million in assets, supported by follow-up interviews. In nearly every instance, the credit unions have reported that their green loan programs have been profitable.
What are the credit union implications?
Moving forward, credit unions should explore “going green” not just as a cost-cutting strategy but also as a business growth strategy. Many energy-saving loans are relatively small and can be offered on an unsecured basis. Historically, this is an important credit union market niche, and one that many banks have avoided. However, in the future, with energy costs expected to rise, from the fuel pump to the electrical outlets in people’s homes, well-structured and well-marketed green loan programs have the potential to become as important as car loans have been in the past to credit unions.