News
Green Lending in the United States: Benefits for Sustainability and Debtors
A growing trend in global debt markets, Green Lending, continues to grow among American debt investors. Green Lending ties sustainability initiatives into loan products designed to entice and reward debtors who meet sustainability goals. The debtor’s sustainability goals are performance-based and include such things as lowering electricity and water usage, reducing landfill garbage, increasing recyclable raw materials in production, and initiatives to reduce their carbon emissions. Meeting these performance goals rewards the debtor with a reduction in the spread of their loan’s interest.
In some instances, the debt’s use is to implement sustainability initiatives in factories owned by the debtor. Being able to reduce their carbon footprint is usually advertised by these debtors, increasing their sales in a worldwide market that demands sustainability in the products they buy.
The Driving Force Behind Sustainability
Who is the driving force behind corporate lending tied to sustainability? It’s the investors who are driving this change, not the lenders. According to Bloomberg, ‘Green Finance’ is now a $92 Trillion worldwide business and growing- per 2018 data. In the U.S., sustainable assets reached $12 Trillion in 2018; the 2019 numbers are still to be determined.
Money is gushing from investors into any investment labeled green or sustainable. In the past, sustainable and green was a description of a company’s products. Today it is descriptive of both the company’s stocks and debt. The debt markets continue to evolve by offering green debt, with rewards to the debtor, for their sustainability efforts.
Some investments are greener than others, while some offer sustainability in only one area, like electricity use reduction. In finance, there is no agreed-upon definition of what green truly is, but new sustainability standards were issued in 2019 that global companies now follow. However, it is the responsibility of the advisor and the investor to research the debtor’s use of the loan and its sustainability benefit before investing since not all ‘green notes’ will be within the standards.
In addition, if you have questions about green lending here in the U.S. or what companies are reducing their carbon footprint, feel free to reach out to me to discuss your interest in green lending.
SW6-20200224
First Fruits Asset Management has been in the financial services profession since 2007. We work together to create a personalized financial plan. We then review and revise the plan as situations and/or goals change over time. Contact us today to learn more about how we can build a partnership with you today.
Climate Change and Finance: Are They Connected?
Over the past ten thousand years, the Earth’s climate has remained stable. Today, we know through science and research that climate change is happening. Many scientific organizations are studying the impact of climate change. While simultaneously economists are examining the socioeconomic implications in various regions of the world. Climate change is undoubtedly impacting finance and the economy in many areas. How much it will continue to reshape the global economy is unknown, but the financial sector is already shifting capital towards tackling climate change in many parts of the world.
Three Implication of Global Warming
There are variations of impact, even within a country’s borders, that will continue to affect production and ultimately, finance. For example, global warming affecting outdoor laborers or crop yields. While rising floodwater inside a factory causes loss of production time due to facility damage, within the same country 500 miles apart. In McKinsey Global Institute’s January 2020 report, Climate Risk and Response: Physical hazards and Socioeconomic Impacts, three implications of global warming stand out:
Systematic- While the direct impact of climate change is local, it can have knock-off effects across regions and sectors, through interconnected socioeconomic and financial systems.
Regressive- The most impoverished communities and populations within each impacted area typically are the most vulnerable. Climate risk creates spatial inequality, as it may simultaneously benefit some regions while hurting others.
Under-Prepared- While companies and communities have been adapting to reduce climate risk. The pace and scale of adaptation are likely to need to increase to manage rising levels of physical climate risk. Adaptation will entail rising costs and tough choices that may include whether to invest in hardening or relocate people and assets.
The financial sector in many economies of the world is already preparing for the risks of global climate change. Aside from corporate social responsibility and green lending. There are fundamental reasons why banking and finance are creating standards for investing and allocating capital towards solving climate change. Some of the changes include moving money out of fossil fuels and toward greener renewable fuels and projects, for example.
Changing Policies
The International Monetary Fund (IMF) now has policies requiring IMF member banks (and their fund managers and investors) to disclose climate vulnerability and measure their country’s financial situation to respond to climate change. If a country is unable to invest in or fund substantial carbon-reducing initiatives, they are unlikely to receive IMF development monies. This, in turn, affects that country’s ability to lend towards business development within their borders.
The proof exists that climate change drives extreme weather-related disasters causing damage to infrastructures and economies. IMF data shows that even seven years after a climate-related disaster, the country’s GDP (Gross Domestic Production) remains 1% lower than it would’ve had the disaster not occurred. We know that climate change and finance are interconnected. What we do today will have an impact on our planet and its inhabitants.
SW6-20200224
First Fruits Asset Management has been in the financial services profession since 2007. We work together to create a personalized financial plan. We then review and revise the plan as situations and/or goals change over time. Contact us today to learn more about how we can build a partnership with you today.
A Debt Reduction Plan for 2020
Being debt-free is possible for everyone, regardless of income. Learning to manage our debt and spending habits and then focus on saving can be life-changing and positively affect your net worth. Net worth calculates by subtracting your liabilities (debt owed) from your assets (not financed). Net worth is calculated for both individuals and companies and is an accurate determination of how much someone, or something, is worth. In this article, we discuss how you can create a debt reduction plan for 2020.
Countdown to Tax Season
With 2020 barely started, preparation for tax season is underway for many investors. Now in the second year of filing taxes under the Tax Cuts and Jobs Act of 2017 (TCJA), focusing your attention on deductions, you can use versus those that were eliminated will necessitate that you plan. The idea of TCJA was to increase the number of Americans who choose the standard deduction rather than itemizing. Here are a few standardized 2019 deductions you don’t want to miss:
Drawing Social Security Early and Still Working? The Social Security Earnings Test is Crucial.
Many people decide to ‘semi-retire’ early and start taking their Social Security Retirement benefit at the earliest age possible. It’s appealing to be able to work part-time or where you have an interest. You may start a small business while making an income and receive Social Security retirement benefits. While early retirement and a part-time job may be of interest to you, it can affect your Social Security Retirement benefits if you aren’t full retirement age. Take the social security earnings test to learn more about your social security benefits.
The SECURE Act Is Law- Notable Changes to Retirement Savings
Effective January 1, 2020, the SECURE Act, a progressive change to retirement savings plans, is now law. The last legislation to retirement savings happened when Congress allowed for the automatic enrollment of employees. Also the addition of Target Date funds to retirement plans in 200
Your Retirement Nest Egg- A Carton Full of Options
Many people refer to their retirement savings as a “retirement nest egg,” but in theory, it should be made up of many sources of retirement income-many eggs. Even if Social Security and a company retirement plan were their only retirement savings sources, likely they haven’t thought about their withdrawal strategy. It’s not as simple as just drawing down retirement income from one or two sources without a plan. Have the following been considered?
2020 is the Year to be Money Savvy
Definition of Savvy: having or showing perception, comprehension, or shrewdness especially in practical matters.
Money Savvy: smart with money, money-wise, financially astute, shrewd.
If you started saving for retirement early you are money savvy and, chances are you’ll hit your retirement goal. However, if you’re like most Americans, you didn’t start right away and will need to plan for a possible retirement savings shortfall. How can you make up the difference? Don’t put off saving more later, start now! Now is the time to start maximizing your savings, while you still have time to make up the difference. Review your saving and spending habits and assess what you can do to save more this year:
Aging in Place: Growing Older at Home
The U.S. population continues on growing older, with the baby boomer generation now the largest generation ever. By 2035, one in three heads of households will be someone age 65 and older. The American population will have one in five people age 65 or older, an increase of 30 million people over the next thirty years. Not all people in this group have recovered from The Great Recession, leaving them with lower incomes and homeownership rates than previous generations. As our population ages, the demand for affordable housing connected to accessible services will continue to increase, and many will find their own homes the only affordable option.
Until Debt Do Us Part
The thought the division of joint debt discussed when saying “I do,” to any relationship. For couples that combine both assets and liabilities, a split signals the dilemma of dividing both. About half of all marriages in the U.S. end, according to the American Psychological Association, making debt a significant hindrance to financial security for some divorcees.