Sustainability was a key theme during November’s Leasing Life Conference 2022 in Paris, here Tim Chapman, the managing director of Hickman Shearer offers his takeaways from a panel discussion he led on the circular economy and equipment finance.

While the COP27 negotiations were taking place in Egypt, the asset finance industry was gathered in Paris for the Leasing Life Conference 2022. 

A key discussion topic in Paris was entitled: What sustainability and the circular economy look like for the asset finance industry, which I chaired and had the pleasure to be joined by six leading representatives from KPMG, 3StepIT BNP Paribas, DLL, CSI Leasing, PEAC and Siemens Finance.

The various presentations and subsequent discussions focused on the challenges and opportunities for the asset finance sector, and how the sector can offer guidance for clients undergoing a transition to a low-carbon economy.

From left: Tim Chapman, MD, Hickman Shearer (standing); Patrick Perquy, Sales Director Vendor International, PEAC Finance; Matthias Grossman, CEO of Commercial Finance, Siemens Financial Services; Carmen Ene, CEO 3stepIT and BNP Paribas 3 Step IT; Charles Garity, Senior Vice President, International Asset Manager, CSI Leasing; Benjamin Blume, Partner, Deal Advisory, KPMG; Marije Rhebergen, Global Head of Sustainability, DLL.

What are the potential opportunities and uncertainties?

A deep dive into the automotive, energy and IT sectors revealed excellent insights into how these sectors are evolving and providing opportunities but also uncertainty for equipment lessors. 

This was effectively demonstrated by the growing demand for many classes of e-vehicles and e-construction plants, despite the higher initial cost, and uncertainty as a result of potentially more rapid technological obsolescence alongside ongoing supply-chain issues. 

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And as the clean energy sector goes through radical transformational change accompanied by different business models, new technologies and new asset types, equipment lessors are responding to the challenges of funding material capital expenditure (Capex) demand for leading and sometimes unproven technology.

How can lessors make a difference?

From the discussions, equipment lessors are in an ideal position to make a vital contribution to the journey to net zero. At the front end, by understanding and building relationships with new technology suppliers and operators and by incorporating discounted rates for sustainable or low-emission assets.

At the back end, by embracing the circular economy as a complimentary lever to decarbonisation in extending the life of an asset, increasing asset sharing schemes and further developing end-of-life asset recycling. Evidence presented showed how IT asset lessors in particular were building joint ventures to re-process end-of-life equipment.

And finally, broad consensus suggested that measuring carbon emissions still offered the best way to combat green-washing and demonstrated a real reduction in greenhouse gasses both internally for the organisation and with one’s clients. 

However, again genuine challenges exist particularly in obtaining accurate use measurement and unit metrics. Also, whilst Scope 3 emission reporting is not yet mandatory, the tide is only going in one direction which could again be another major challenge for the market.

Source: World Economic Forum

How will asset sustainability be rated?

As sustainability and carbon reduction becomes ever more critical, its proper measurement and reporting will be increasingly more important, with lessors effectively becoming rated.

Will grey assets become increasingly hard to fund as they adversely impact lessors’ emission targets? How will lessees be treated by funders if their emission targets are not achieved?

From an asset advisory perspective, we at Hickman Shearer welcome the opportunity to continue to support the industry by providing residual value advice for emerging low-emission assets and emerging technologies. We will continue to expand our equipment scoring index of new equipment against sustainable criteria to differentiate between grey and green assets for lessors.

As far as equipment end-of-life is concerned, we will continue to incorporate the circular economy into our asset disposal strategy in enabling relevant assets to be re-lived, and others to be recycled, but with a zero-to-landfill target. By way of example, in our recent outside broadcasting equipment sale at Arena Television the recycling of assets to new users resulted in a carbon saving of 3,687 tonnes of CO² (using MyCarbon calculation and certification).

See you at the Leasing Life Sustainable Finance Summit and Awards on 11th May 2023.

Sustainable Finance Summit 2023 promises to answer today’s burning questions

Hickman Shearer and CA Global Partners to sell Arena Television’s assets