Green Loans Can Refine Portfolios

Environmentally friendly Vermont State Employees explores loan options to help members retrofit their homes for savings.

 
 

After more than two decades of investment in extensive green initiatives, the lush, wooded state of Vermont was recently ranked fifth in the nation for energy efficiency, according to the 2011 State Energy Efficiency Scorecard. And the continuing statewide push has even encouraged many Vermonters to look for ways to retrofit their own homes with green solutions.

Whether the decision is based on a lifestyle choice or a desire for cost-savings, many people have conducted home audits to see how much they could save with new home features, says Yvonne Garand, vice president of marketing and business development at Vermont State Employees Credit Union ($599.2M, Montpelier, VT).

“After doing these home audits, people are very excited about the [renovations], but paralyzed because they don’t know where they are going to come up with $5,000 to $6,000 to do the retrofits,” she says.

VSECU saw this growing demand for financing options going unaddressed by other financial institutions in the area. In response, it formulated a new suite of loan products this summer, labeled V-Green loans.

The V-Green product suite consists of five different financing options for different energy efficient retrofits, such as solar panels, wind turbines, or heating systems.

  • The Energy Improvement Mortgage rolls the cost of energy efficiency projects into a first mortgage without increasing monthly payments.
  • Off Grid Mortgages assist consumers looking to live in a home without traditional power or fuel sources.
  • Energy Improvement Home Equity Loans provide consumers with discounted rates or extended terms. These unsecured loans works best for those with equity in their homes and who aren’t payment sensitive.
  • The Energy Improvement Loan is a discounted, unsecured loan that offers flexibility for home energy improvements.
  • TheGreen Vehicle Loan is for consumers interested in buying a hybrid, electric, or high fuel economy vehicles. The discounted loan provides manageable payments at a lower rate – 50 basis points from the current rate – and for the long-term.

The credit union already had a very green history prior to the V-Green program, having issued more than 200 green loans for about $2.5 million. A partnership with Efficiency Vermont ─ a nonprofit formed in 2000 to promote renewable and alternative energy sources ─ helped the credit union buy down interest rates by 3% for home retrofits, resulting in about $1 million worth of loans. And a partnership in the summer of 2011 with the Vermont Public Interest Research Group (VPIRG) also landed VSECU another $1 million in green loans.

“We love our state. We love our neighbors,” Garand says. “We love Vermont and anything that we can do to keep Vermont clean, safe, vibrant, and strong, we want to be a part of that.”

Since formalizing the new V-Green program at the end of June, the credit union has processed roughly $600,000 in green home equity loans, says Chuck Karparis, vice president of lending. It has also issued 20 green vehicle loans and 13 unsecured loans for energy efficiency purposes.

Best of all, the credit union has seen very low delinquency and only one charge-off with these green products.

“We can’t get enough of these loans,” Karparis says. “The people interested in them are usually very educated and want to do the right thing.”

The credit union’s loan portfolio has increased by roughly 6%, from $344.3 million to $365 million in the second quarter compared with a year prior. And while not all of the credit union’s progress can be attributed to the V-Green initiative, this creative lending option has helped diversify the portfolio with sought-after products.

Viewed as much more than just another business lines, VSECU wants this green lending program to continue to evolve and feed into other, broader energy-saving initiatives in the community ─ even those that extend outside the financial institution.

“It’s a growing industry,” Karparis says. “This isn’t something that’s going to go away anytime soon.” 

Author Bailey Reutzel and multimedia producer Melissa Forsyth hit the road in August for a weeklongCooperative Trek. They traveled from Washington, DC, to Portland, ME, stopping along the way at 11 credit unions and learning first-hand about successful strategies to share with our readers. Follow the 2012 Cooperative Trek on CreditUnions.com as we release stories from the road throughout the fall of 2012.

 

 

 

Sept. 24, 2012


Comments

 
 
 
  • Great article. VSECU’s experience underscores the findings of the Filene Research Institute’s recent study, Finding Sustainable Profits: Green Lending in Credit Unions. That study found, “More and more credit unions are discovering that lending for green purposes is not only the right thing to do but also the smart thing to do. It is good business in its own right. The loans are profitable; they attract financially strong borrowers, spur membership growth, and lead to new growth in solidly performing loans on the balance sheet.”
    Robert Hall