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Green finance: AIB case study

Bank leads by example with loans for energy-efficient products and services

AIB chief executive Colin Hunt: ‘One of our goals is to ensure a greener tomorrow by backing those who are building it today.’

AIB chief executive Colin Hunt: ‘One of our goals is to ensure a greener tomorrow by backing those who are building it today.’


Sustainability has been a key strategic priority for AIB since it published its first sustainability report in 2017.

“We see climate change as the greatest challenge facing this generation. We believe that if we don’t take action now – as individuals, as a society, in politics and in business – our children and our grandchildren will not forgive us,” says its chief executive Colin Hunt.

He believes AIB is leading by example. It was the first Irish bank to pledge to operate as carbon neutral by 2030, using a net-zero approach. That means cutting greenhouse gas emissions to as close to zero as possible – through elimination of carbon rather than offsetting it. It has reduced its electricity by 30 per cent since 2014, versus 2019 figures, and its overall emissions by 40 per cent.

Other measures include a €1.6 million investment in LED lighting upgrades across 52 locations, plus ongoing branch network retrofits for heating and cooling systems and the installation of energy meters. It is the only bank in Ireland or the UK to make the Carbon Disclosure Project (CDP) A list this year.

But he believes banks play an important role externally too.

“Given the investment required to finance the transition to a low-carbon economy is estimated at circa €50 billion for Ireland, it is clear that banks have a crucial role to play in supporting individuals and businesses to make the transition through the provision of loans in a manner that helps in the fight against climate change,” he explains.

AIB has already stated its ambition that 70 per cent of all new lending will be “green’’ or “transition’’ by 2030.

Sustainability-linked loans

It is now accelerating the rollout of products and services that assist customers in reducing their carbon emissions. “On the personal side, these include attractively priced green mortgages to support customers seeking to buy energy-efficient homes and green personal loans for purchases such as an electric vehicle, upgrading home insulation or windows or installing renewable energy systems,” he explains.

AIB also offers sustainability-linked loans (SLLs) to eligible corporate customers. Where the relevant criteria are met, these offer firms a reduced rate of interest linked to the achievement of ambitious, predetermined sustainability targets.

The bank offers what he reckons is the lowest green five-year fixed-rate mortgage in the Irish market, with rates starting at 2.10 per cent where the loan represents less than 50 per cent of the value (LTV) of an energy-efficient home (BER B3 or higher).

“One of our goals is to ensure a greener tomorrow by backing those who are building it today. AIB’s green lending to renewables and green buildings rose to €1.46 billion last year compared with €1.2 billion the previous year, demonstrating the momentum behind the transition. Green and transitional lending accounted for 20 per cent of our new lending in the first half of the year,” he says.

The bank’s energy, climate action and infrastructure lending continued to be both the fastest-growing and the best-performing loan book in AIB.

“Our own research shows 57 per cent of people think Irish businesses should help them make environmentally friendly choices,” adds Hunt.

Green capital

Moreover, the more green lending it does, the more green capital it can attract. “AIB has over the last year or so raised €1.75 billion from issuing green bonds as investors are attracted by AIB’s strong green lending credentials,” says Hunt.

Right now one of the biggest dates on the horizon is Cop26, the 26th UN Climate Change Conference of the Parties, which takes place in Glasgow in November.

The pressure to reach transformational agreements will be intense as governments around the world look to accelerate the plans necessary to reduce carbon emissions and make meaningful improvements to national determined contributions (NDCs) – the key measure for countries around the world.

“Building on Ireland’s Climate Action and Low Carbon Development Bill, and Ireland’s first carbon-neutral budget, we will be further developing robust plans and decarbonisation supports and metrics for customers to deliver meaningful reductions, especially for the most carbon-intensive sectors,” says Hunt.

The changes it plans will give effect to new EU banking regulations promoting greener lending as the European Central Bank prepares to stress test all Eurozone banks in 2022 against their ability to withstand climate change risks.

“We know there is widespread public support behind the drive to limit global warming as our own research shows people increasingly want greener products and services. However, that doesn’t mean the transition will always be easy,” cautions Hunt.

“Change is coming and there will be challenges ahead as consumers and businesses are required to adapt to new, greener ways of living and banking.”