Barclays: Green investing offers businesses major benefits

A growing mountain of evidence suggests green investments are not just an admirable ethical decision for businesses, but are actually delivering tangible commercial benefits - not just for large corporates, but for small and medium-sized businesses across the UK as well.

This year alone studies have shown how B-Corps grow 28 times faster than the national average, delivering an average year-on-year growth rate of 14 per cent in the last year, compared to the national GDP growth rate of 0.5 per cent at the start of 2018. Meanwhile, reports revealed how increasing numbers of US firms are using sustainability strategies to boost revenues and how eight in 10 bosses of small businesses in Britain want to be more sustainable.

Now new data released today by high street bank Barclays suggests the business case for green investments just keeps getting stronger. According to a YouGov survey of 535 senior managers in mid-sized UK businesses, almost three-quarters of firms claim to have experienced at least one commercial benefit from taking environmentally responsible actions such as improving energy efficiency or investing in clean energy.

The survey, which cut across multiple sectors, found that more than a third of respondents reported a drop in business costs thanks to green investment, while 27 per cent said they believe environmental actions will help their business get recognised by consumers as being "environmentally responsible".

However, there were signs that more could be done to make green investments more attractive for smaller firms. For example, regulatory demands were cited by just 19 per cent of respondents as a driver of investment, suggesting the government could act more boldly to force firms to change their ways - although the report does note that such pressures are increasing.

Moreover, only 40 per cent of respondents said they expect the amount they will invest in this area to increase over the next five years and a quarter said it is "not a business priority", with costs raised as the primary concern. One in three firms cited financial concerns, with 19 per cent reporting a lack of funds as one of the main reasons why green investment was being delayed and 16 per cent citing concerns over returns on investment.

In a clear message to government, more than half of companies said government could help firms overcome these barriers by offering incentives such as tax breaks or subsidies.

"It's a mixed picture, with most mid-sized companies taking some steps to invest in green activity, but with much more still to do," admits Tony Walsh, head of mid-corporates at Barclays Corporate Banking.

"We found that there are clear commercial and reputational benefits if businesses do more in this area, as well as growing regulatory demands to increase green investment. It's up to all of us: individual companies, trade bodies, government and finance providers to come together and make sure that investment in green initiatives is accessible and prioritised sufficiently.

"If you're a business leader and the risks and opportunities around the green agenda are not being discussed in your boardroom, you might miss out on the commercial advantages that are available and suffer reputationally, and could be left behind," he warned.

Barclays is one of a number of banks to boost their offer of targeted financing for green investmentsin recent years. Earlier this year it launched a new range of green finance products to help its corporate clients fund low-carbon projects and investments, including loans, deposits, asset finance, and innovation finance.

Meanwhile, rival lender HSBC is also targeteding the green finance market, promising to provide $100bn in sustainable financing and investment by 2025, with particular support for "clean energy and lower carbon technologies". At the same time, NatWest recently launched a new energy efficiency audit service for business customers.

New proposals released earlier this month by the European Commission suggest such an approach could become more commonplace in the EU financial market in the coming years. A raft of new incentives could be introduced to encourage banks to relax lending requirements for green projects, in a bid to get finance flowing into sustainability projects.

There are also signs the message that sustainable investment is good for business is getting through to larger corporates. Firms with an annual turnover higher than £50m are more likely to say that environmental sustainability is extremely important, according to the Barclay's research.

Although the paper suggests smaller firms are starting to recognise the benefits, it seems the conditions aren't yet right for them to fully embrace a transition towards greener business practices. But tighter regulations, better access to funding, and more active marketing of green finance support from banks should help push the needle in the right direction.

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• Topics
• Investment
• Incentives
• green finance
• In-depth
• green growth