Profit with purpose
The promise of green lending is finally being fulfilled as more lenders move to help borrowers save money while saving the world
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MOST BROKERS in Australia are aware of the green lending market. With the potential to offer customers discounted home, personal and car loan rates for purchases or upgrades that are energy efficient, there is a strong incentive for brokers to consider these loans for their finance customers, should they be dealing in housing stock or other loans that will meet applicable green lending criteria.
Fewer brokers have real lived experience writing green loans, although that may be about to change. Green lending is slowly making its way from the market edges to the mainstream as more lenders launch green loan products, more efficient housing stock makes its way onto the market, and buyers begin seeking out green loans, either to save on costs or save the environment. Brokers who understand green loan products stand to benefit as the market steadily matures.
These potential savings have driven demand in an environment of high inflation and interest rates.
“Cost of living pressures, particularly around energy costs, and the impact of climate change have driven increased demand in green lending as consumers seek to make homes more energy efficient to help reduce energy bills and their [homes’] impact on the environment with solar panels and battery-storage systems, and reduction of heat transfer with insulation and double-glazed windows,” Drummond says.
Lenders in the green lending market are benefiting from this swelling consumer interest. Great Southern Bank’s head of branches and broker, Mathew Patterson, says that, from a standing start, the lender has been experiencing strong growth in green personal loans, particularly green car loans, which have come to represent a growing and significant part of its personal lending portfolio.
This success in the green niche means Great Southern Bank will soon add its name to the small but growing pool of lenders offering green home loans. “We are following up imminently with our new green home offer, which provides a discount to our existing variable home loan products,” Patterson says. “This discount is for customers seeking to buy, build or refinance homes which are more energy efficient.”
The shift in what customers care about is giving lenders a chance to innovate and differentiate to align with their values. As a customer-owned and certified B Corp bank, Great Southern’s green lending products are a result of listening to customers and taking action in line with its stated principles.
“Clearly, living in a more sustainable way is of increasing importance to our customers, and to the broader society. As a customer-owned bank, we have a different relationship to our customers and communities than shareholder-owned banks. We tend to look closely at what they want and need, as well as look to our own founding principles and our drive to be a responsible bank,” Patterson says.
Gateway Bank has its own ‘Pocket & Planet’ purpose to help customers save money and reduce environmental impact. Drummond says, “In many categories, consumers often need to pay more for the ‘green’ or ‘environmental’ option, sometimes referred to as a ‘green tax’. We believe that shouldn’t be the case, and there should be solutions that benefit pockets and the planet.”
of Australia’s energy consumption is attributed to homes
Australian homes and energy consumption
Gateway Bank, which has offered a Green Home Loan for three years, has seen enquiry and application volumes through direct and broker channels increase year-on-year. “Our green lending portfolio has grown by over 60% in the past 12 months, driven by cost-conscious and environmentally focused borrowers looking to enhance the energy efficiency of their homes,” Drummond says.
Some of this interest is driven by a desire to lower energy costs or, in the case of dwellings, improve liveability. But it is also true that, as sustainability becomes more of a concern, more consumers are interested in houses and banking products that align with their desire to look after the environment.
A survey by local SaaS banking platform Mambu in 2024, of 500 Australians and New Zealanders, found that 60% of respondents wanted their bank or financial institution to become more sustainable in the future, even though only 12% knowingly used a sustainable bank, banking products or services.
“Discovery conversations on green and ethical lending have been growing in both volume and importance for a while,” says Patterson. “Customers are interested in the loans but also in the ethical and environmental practices of the bank behind the loans – that’s an area where Great Southern Bank is quite strong.”
Gateway Bank is one of Australia’s leading customer-owned banks and has been in operation for over 60 years. Gateway offers a wide range of products and services covering everyday banking, home loans, personal loans, reverse mortgages and commercial mortgages. Our Green Plus Home Loan has been recognised by Mozo as Australia’s best Green Home Loan in 2022 and 2023 and by Finder as Australia’s Best Green Home Loan 2023, underpinning the bank’s commitment to our ‘Pocket & Planet’ purpose.
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Great Southern Bank is one of Australia’s largest, oldest customer-owned banks, which has supported the banking and financial needs of customers for almost 80 years. The bank was founded in 1946 as Australia’s first credit union and grown through several decades of mergers. Its purpose – helping all Australians own their own home – is core to its identity. Today, Great Southern Bank has over 410,000 customers and continues to grow strongly as more Australians seek a true, fairer banking alternative.
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More green lending products will help the market mature and further raise consumer awareness.
The market will also benefit from more energy-efficient housing stock. To qualify for a green home loan, properties usually need to be certified as having a 7-star rating under the Nationwide House Energy Rating Scheme (NatHERS), or as a Green Star Home by the Green Building Council of Australia. Recent changes to the national building code mean that more new homes will now meet these efficiency ratings.
These developments will make green loans a growing part of broker conversations with customers.
“This is a pretty ideal time for brokers to ask the important questions – to find out more about how these products work and delve into what these loans offer,” Drummond says. “While it may not be the biggest opportunity at the moment, it will become increasingly significant, and by
“Discovery conversations on green and ethical lending have been growing in both volume and importance … Customers are interested in the loans but also in the ethical and environmental practices of the bank behind the loans”
Mathew Patterson, Great Southern Bank
In Partnership with
Green loans are mortgage and personal loan products that reward environmental efficiency. In the home lending market, green loan products can be used to purchase a property that meets specified green lending criteria, or for certain upgrades to properties, like the purchase and installation of solar panels. Green loans are also funding a growing number of electric vehicle (EV) sales.
The beauty of green loans is that they can offer customers a win-win on finance costs over the long term, when money saved through rate discounts is added to energy cost savings. A KPMG study conducted for the Green Building Council of Australia found that borrowers could end up saving $115,000 in interest when purchasing an average-sized home if they directed energy bill savings into mortgage repayments.
becoming an early adopter it can provide access to an ever-growing segment of the market.”
Great Southern Bank’s Patterson says brokers will need to work green loans into their process.
“There is a challenge in determining the appropriate times to discuss it with customers, as there are specific criteria that must be satisfied to qualify access to the green home offer. Brokers can proactively inform customers about the available ‘green’ products. It’s important to verify their eligibility, as they may be unaware of it, and include this information in their assessment before suggesting any options. It can also help build the broker’s relationship with the customer,” Patterson says.
However, lenders are united in the belief that the green lending wave for brokers has only just begun.
“Accessing this growing segment can open new client pools, alongside new referral partners and markets, to support brokers’ businesses,” Drummond says. “The key for brokers to capitalise on the opportunity is to ensure they understand the parameters and requirements of a green loan, along with the consumer benefit. Align this with what brokers do best – understanding their clients’ situations and requirements – and they will be well placed to tap into the opportunities green lending provides.”
“Our green lending portfolio has grown by over 60% in the past 12 months, driven by cost-conscious and environmentally focused borrowers looking to enhance the energy efficiency of their homes”
Zeb Drummond,
Gateway Bank
“Given the relatively small market and consumers’ lack of awareness of green lending, many brokers won’t have been exposed to green lending options,” says Gateway Bank chief operating officer Zeb Drummond. “But as consumer awareness of green lending and the relevant energy efficiency certifications grow, this segment will undoubtedly become more significant.”
Industry experts
Mathew Patterson
Great Southern Bank
Zeb Drummond
Gateway Bank
Industry experts
Zeb Drummond has over 18 years of banking experience, having worked across a range of disciplines in a variety of organisations, from the big banks to customer-owned banks, and has been at Gateway for eight years. As chief operating officer, Drummond currently leads Gateway’s sales and operational teams, including the direct and third party sales functions, the customer service teams and the lending origination, settlement and transactional service teams. He also manages the relationship with Gateway’s broker aggregator partners.
Gateway Bank
Zeb Drummond
Mat Patterson has over 25 years’ experience in the home lending industry. He has worked at a senior level at ING Direct, and at ME Bank where he most recently was head of broker. Patterson joined Great Southern Bank as head of broker partnerships in 2021 and has since focused on building the bank’s offering around the needs of brokers. During his tenure, the bank has significantly improved its home lending systems and broker offering – over 70% of all home lending now comes via the broker channel, with the bank also growing its accredited broker network from 2,450 to over 7,000.
Great Southern Bank
Mathew Patterson
Mathew Patterson
Great Southern Bank
Zeb Drummond
Gateway Bank
Industry experts
Zeb Drummond has over 18 years of banking experience, having worked across a range of disciplines in a variety of organisations, from the big banks to customer-owned banks, and has been at Gateway for eight years. As chief operating officer, Drummond currently leads Gateway’s sales and operational teams, including the direct and third party sales functions, the customer service teams and the lending origination, settlement and transactional service teams. He also manages the relationship with Gateway’s broker aggregator partners.
Gateway Bank
Zeb Drummond
Mat Patterson has over 25 years’ experience in the home lending industry. He has worked at a senior level at ING Direct, and at ME Bank where he most recently was head of broker. Patterson joined Great Southern Bank as head of broker partnerships in 2021 and has since focused on building the bank’s offering around the needs of brokers. During his tenure, the bank has significantly improved its home lending systems and broker offering – over 70% of all home lending now comes via the broker channel, with the bank also growing its accredited broker network from 2,450 to over 7,000.
Great Southern Bank
Mathew Patterson
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A bourgeoning market for green lending
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Zeb Drummond
Gateway Bank
Mathew Patterson
Great Southern Bank
Mat Patterson has over 25 years’ experience in the home lending industry. He has worked at a senior level at ING Direct and ME Bank, where he was most recently head of broker. Patterson joined Great Southern Bank as head of broker partnerships in 2021 and has since focused on building the bank’s offering around the needs of brokers. During his tenure, the bank has significantly improved its home lending systems and broker offering – over 70% of all home lending now comes via the broker channel, with the bank also growing its accredited broker network from 2,450 to over 7,000.
Great Southern Bank
Mathew Patterson
Zeb Drummond has over 18 years of banking experience, having worked across a range of disciplines in a variety of organisations, from the big banks to customer-owned banks, and has been at Gateway for eight years. As chief operating officer, Drummond currently leads Gateway’s sales and operational teams, including the direct and third party sales functions, the customer service teams and the lending origination, settlement and transactional service teams. He also manages the relationship with Gateway’s broker aggregator partners.
Gateway Bank
Zeb Drummond
Greener brokers?
Published 21 Oct 2024
24%
of homes are designed to meet only minimum NatHERS requirements
81.7%
of existing housing falls below optimal economic and energy performance
98.5%
of national greenhouse gas emissions are produced by Australian homes
11%
of Australian deaths are estimated to be due to cold living environments
6.5%
is the maximum energy price difference between 6-star and
7-star homes
25%
Sources: Home Energy Ratings Framework 2024; National House Energy Ratings Scheme (NatHERS)
2019
Source: Electric Vehicle Council
New EV sales as percent of new light vehicle sales in Australia*
0.7%
0.8%
2020
2.1%
2021
3.8%
2022
8.5%
2023
* Includes battery electric vehicles and plug-in hybrid electric vehicles
Rising market share of electric vehicles
That borrowers are interested in energy-efficient homes and vehicles has been clear for some time. Research conducted by CSIRO and Common Capital on behalf of the EnergyFit Homes initiative in the middle of the last decade found that, even back then, 92% of those surveyed considered it important to have information about the energy efficiency of a home when buying or leasing.
This appetite for energy efficiency is not abating. This year, Domain’s Sustainability in Property Report found that green homes attract 16% more listing views and spend 4% less time on the market than non-energy-efficient homes. Sustainable features like solar panels and double-glazed windows add a price premium of $112,000 or 14.5% to houses. Meanwhile, sales of new EVs as a proportion of light vehicles sold have been doubling year-on-year. Electric Vehicle Council data shows EVs accounted for 8.5% of all new light vehicle sales in 2023, with at least 180,000 EVs now out on the roads.
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