ELFA Convention Panel Reports on Progress

By: Patricia Voorhees

Few would argue that sustainability represents today’s greatest global challenge – and that we’re already playing “catch-up.”

After all, it is estimated that $6.9 trillion of annual investment is required up to 2030 to meet climate and development goals.[1] To help achieve that objective, the United Nations Environment Program Finance Initiative released the Principles for Responsible Banking in September 2019, with 130 bank signatories holding $47 trillion in assets – one-third of the global banking sector.[2]

Despite the topic’s importance, I must admit that I had some doubts about how many people would attend a panel I moderated at last month’s 58th ELFA Annual Convention in Washington, D.C.

The problem was that the panel, titled ­“Sustainability in Equipment Finance: New Business Models, Technologies and Capital Markets,” was the final breakout session on the last day of the conference. To be honest, we had a friendly over/under bet going on how many attendees it would attract. We needn’t have worried – the over bet prevailed. The session was well-attended – and there was plenty to talk about, such as:

  • What actually makes a finance product sustainable (or ESG, supporting environmental, social and governance principles)?
  • What are some of the roadblocks to the development of sustainable finance products?
  • Will the equipment finance industry have an advantage in developing these solutions given its historic focus on asset management and efficiency?

Helping to answer these and other critical questions were panelists Chris Couture, vice president of customer financing and asset management, SunPower Corporation; Cassandra John, principal of Sif Capital Advisors; Steven Riggs, president of direct solutions, DLL Advanced Solutions; Jeffrey Rogers, president & CEO of LiftForward; and Jake Wachman, vice president of digital, SunPower Corporation.

Cassandra began the discussion by highlighting the best asset classes for sustainable investment, such as cleantech (food/agriculture, electric vehicles and waste management), renewable energy and smart cities/energy efficiency. However, she warned that significant challenges remain, including the relative immaturity of sustainable technologies across sectors, coupled with the fact that most commercial and industrial (C&I) borrowers are unrated credits. This situation can render otherwise viable solutions unaffordable or can limit access to capital markets.

Steven emphasized that sustainability is a foundational tenet at parent bank Rabobank and  DLL. The Advanced Solutions Group that he leads focuses on enabling businesses to maximize efficiency and sustainability in usage of their resources. The team is seeking acquisitions to accelerate development of pay-per-use capabilities and intends to lead with the product in direct selling efforts. He noted a PWC study that estimates the growth of the sharing/pay-per-use economy across asset types – expanding from $15 billion in 2013 to $335 billion in 2025.[3]

Jeffrey described how LiftForward’s technology solution integrates with manufacturers’ assets to help them handle orders and fulfill subscriptions, as well as manage the refresh process when the subscription period ends. LiftForward supports the circular economy by redeploying end-of-subscription assets to users with smaller budgets, to those who don’t necessarily require the latest technology, or to developing international economies. LiftForward can also break down and recycle end-of-life assets.

Jake demonstrated the power of SunPower Design Studio, which allows residential building owners to use a mobile device or computer to design solar installations and understand potential savings at lightning-fast speeds. The accuracy and speed of the solution’s machine learning software promise to remove much of the cost and uncertainty from solar installation design.

Chris reminded the audience that because solar panel installations are an established finance asset with a proven track record of garnering capital markets support, they’re a great place to invest as other sustainable models emerge.

Following the session, I had an interesting conversation with the CEO of a large independent.  He predicted that future discussions on this topic will be standing room only and we will remember the day when we were taking over/under bets. l think he’s right. We agreed that our industry has led the way in asset management – and is perfectly poised to deliver sustainable finance products and services. I look forward to the evolution.

Coincidentally, the United Nations Global Compact on the Environment just released a related report titled “Scaling Finance for the Sustainable Development Goals.” The report asserts, “Digital finance has the potential to deliver environmental outcomes and support a transformation in financing for sustainable development by, for instance, mobilizing capital for critical priorities and mainstreaming social and environmental factors throughout the system.” You can download the report here.

[1]Financing Climate Futures: Rethinking Infrastructure,” OECD/The World Bank/UN Environment, 2018

[2]UN and Leading Banks Launch Principles for Responsible Banking,” Moody’s Analytics, September 22, 2019

[3]The Sharing Economy: Consumer Intelligence Series,” PricewaterhouseCoopers LLP, 2015

 

 

 

Patricia Voorhees is a director of The Alta Group