ESG: How are secured finance lenders approaching sustainability?

Environmental, Social and Governance (ESG) is becoming a key consideration in the secured lending industry. You can learn more about ESG and its position in the secured finance business in our blog. But what exactly are businesses doing to incorporate ESG into their strategy? 

Recently, Ivan Bagaliyski , Director, Go-to-Market Strategy at Solifi, held a webinar centered around the operationalization of ESG in the leasing industry, during which he presented useful insights to help funders incorporate ESG principles into their business. As part of this, we encouraged our guests to contribute by completing a short survey about how they currently rank ESG in their strategy, and what strategic ESG steps they will be taking in the future. 

Scope 3 financed emissions are an important consideration for lenders across the secured finance industry, as they typically comprise the majority of CO2 emissions for asset funders. 32% of our auto and asset finance survey respondents confirmed that they are committed to Scope 3 financed emission reporting, with a further 26% considering it an important part of their business strategy. Scope 3 reporting is a mandatory requirement from 2025 for 21% of the surveyed attendees. However, only 5% of respondents currently report on Scope 3. 

Following on from this, there are other environmental considerations to be made. According to KPMG, numerous Fortune 500 companies are focusing on decarbonization strategy. This involves creating a framework that aims for companies to reach net-zero, whether that’s through renewable energy, redesigning products or investing in better infrastructure. When it came to decarbonization strategies, our survey found that 64% of businesses are considering or have already adopted funding more green assets, while 45% are adopting or considering circular economy models. 

There are many factors to consider when setting ESG strategy, and these can change from company to company. According to our survey, the most popular factor considered when setting ESG strategy is reducing CO2 emissions, as stated by 78% of respondents. Responding to customer demand remains a critical driving force (56% of respondents), and 50% consider risk management to be the third most important component for an ESG strategy. 39% state that profitability is high on the agenda as well. 

It was great to see companies already embarking on the ESG journey.  Out of all the responses to the survey, the key ESG capabilities that businesses have already made steps towards are vehicle emissions data and ESG categorization, followed by ESG portfolio monitoring and analytics.   

What do the results of the survey tell us?  

In conclusion, ESG is becoming a focus for many businesses. Lenders are starting to address the approach to ESG, but may be unsure where to start and lack the tools they need to effectively incorporate a strategy that they can then report on.  

With technology like Solifi Open Finance Platform that seamlessly integrates applications and offers near real-time insights, you can ensure that your company is set up to report on ESG thoroughly with all the data you need right at your fingertips.