Can a good ESG profile and sustainable business model lead to lower financing costs?

Any bank of investor will require a return on their financing whether it is equities (they own a share in the company) or credit (they lend you money). The return they require is higher if they have a perception of a higher risk. And this is also true the other way.

So, if you can show that you have a sustainable business model with low ESG risk after management of these risks you will likely be financed at a cheaper cost.

Example

You ask for a credit in a bank. You design and sell kitchen equipment. You have subcontracted the production to a country that is known for not respecting human rights and that does not really care much about pollution. What are your risks? What happens down there is their problem? No, this can really be your problem. Imagine that a press report state that a factory in that country is responsible for polluting the drinking water of 100 000 persons and that this has led to fatalities. The press report lists up all the companies buying the products from the factory and your company’s name is on the list. Your clients are unhappy about this and your sales are plummeting.

More and more banks and investors as distributors are looking into this.

In this area it is better to be proactive than being the last on board.

If you do not know where to start, we can help you.