What is Green Lending & What are "Green Loans"?
Green lending allows individuals who wish to support environmentally friendly causes to allocate their capital to those who are in some way endeavouring to improve their environmental efficiency. Whether such is in the form of investing in more sustainable (and more cost efficient) energy supply/production or in any number of other ways, lenders may select to invest in funding loans to borrowers whose plan for the use of the borrowed funds is one which they perceive to be beneficial enough to warrant both their emotional and their financial support, in the form of extending a "Green Loan".
The provision of green (environmentally friendly) loans requires some signalling between borrowers and lenders to indicate that a loan is for a particular purpose, and some level of detail may be necessary in the loan request about the particular course of action that the borrower wishes to undertake using the proceeds of this type of loan.
Green Finance via a Green Market
Green loans which achieve some positive environmental impact are interesting, and have some potential positive long-term utility, however, even the means of financing a green project can, itself, be significantly greened if certain conditions can be met and provisions can be made.Imagine, for example, a means by which the two parties (both lender and loan taker) are connected via a market place which is, itself, simply an intermediary, in function, and, as such, has low overhead costs, and, additionally, does not, itself, provide the capital to fund the loan. If loan capital is provided by another interested "green" party, and if fees can be minimized through the disintermediation of traditional financial services companies (such as banks or credit card lenders), then the opportunity exists for a more sustainable and equitable financing alternative to come into existence - that of a "Green Market", both for loans and investment, where funds invested into loans to environmentally conscious borrowers may yield returns that can then be further invested into yet more "green loans". As we economize, efficiency is multiplied.