There is an air of militancy about leasing these days. The debate over asset finance’s place in the green revolution has become more like a shouting match, and even politicians are having their say.
Sweeep, a UK recycling company, was at the centre of a storm last month after, initially, Barclays showed some risk-related concerns over financing one of its latest bit of environmentally friendly wizardry – a piece of equipment that can recycle thousands of television screens each day.
Immediately, Sweeep, the media and then politicians united in a solid front against the bank, citing the need for the financial sector to improve its commitment to green energy projects.
“It is so important that our financial sectors respond to the capital investment needs of companies such as Sweeep,” cried the local labour MP for Sittingbourne and Sheppey, Derek Wyatt (see lead article “Green” furnace funding request presents underwriting dilema)).
Eventually Barclays rose to the challenge and, according to bank sources, around our time of going to press, had unofficially agreed to cough up the £800,000 or so needed to finance the piece of plant.
Asset finance, like it or not, has finally reached the front of the political agenda, and it will only grow in importance as the green debate intensifies.
As with lending to SMEs, those leasing companies which shy away from clean assets, for whatever reason – whether it is uncertain residual values, lack of asset knowledge or, as in Barclays’ case, difficulties involved in relocating an asset in the event of a business failure – will be given short shrift by everybody, from politicians downwards.
But there is plenty of evidence that shows leasing companies are moving with the times and showing commitment to financing green assets with a view to long-term gains as well as, dare I say it, helping the environment.
Last month, for instance, Deutsche Post DHL and Volvo Trucks signed an agreement to supply a whopping 1,800 environmentally friendly EURO 5 new trucks to the UK, Finland and Sweden.
There are lots of examples of European leasing companies going down the clean energy route, as there has been already in the motor finance market.
According to the British Vehicle Rental and Leasing
Association, while in 2007 the average CO2 and mileages for
contracts signed was 157.4 g/km of CO2 and 21,643 miles, in 2008
this had dropped to 149.9 g/km of CO2 and 19,617 miles.
Much more, though, still needs to be done, and will be done, whether the detractors like it or not, particularly as the wave of green legislation coming out of Brussels continues to flood national government’s agenda.
Only last month, the Finance & Leasing Association became embroiled in a war-of-words with the UK government over greenhouse gas emissions (see Brussels Watch on page 11).
I hope, therefore, that the word ‘green’ appears somewhere on your agenda for 2010 and beyond.
Brendan Malkin
brendan.malkin@vrlfinancial
