Mortgages drive AIB ‘green lending’ growth during Covid-19

Green lending at AIB grew by one-fifth last year to €1.46 billion in defiance of a slump in overall lending amid Covid-19, with the increase in this segment driven by customers availing of cheaper mortgage rates for energy-efficient homes.

The bank said in its fifth annual sustainability report that new green lending, also including financing for renewable projects, electric vehicles and projects to help customers move to a low-carbon economy, surpassed its €1 billion target for last year.

The company said earlier this month that its overall lending fell 25 per cent to €9.2 billion as households and businesses concentrated on preserving their financial standing during the pandemic. Green lending accounted for 16 per cent of all new lending, the bank said in its sustainability report.

Lower fixed rate

AIB said customers drew down €335 million of green mortgages last year, up from €45 million of business in late 2019, when the product was first launched.

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Customers with a home that carries a Building Energy Rating (BER) of between A1 and B3 can currently avail, for example, of a green five-year fixed rate of 2.1 per cent on a property with a loan-to-value of less than 50 per cent. A comparable standard five-year loan carries a rate of 2.35 per cent. Green mortgages made up 14 per cent of home loan drawdowns last year, according to the bank.

‘Greatest challege’

AIB reports its green lending to the so-called Global Reporting Initiative, an international standards-setting organisation. Deloitte has provided assurance on the bank's reporting.

"Managing climate change is the greatest challenge facing this generation," AIB chief executive Colin Hunt said.

Mr Hunt, who took charge of AIB two years ago, set a target last November for green lending to account for 70 per cent of new customer advances by 2030 as the State and the EU seeks to meet carbon reduction targets to “net zero” by 2050.

AIB and rival Bank of Ireland are each targeting net-zero carbon emissions from their own operations by the end of the decade.