Finance & Investment Circular Economy

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Virgin, Aspiration Incentivize Sustainable Spending

Virgin Money’s sustainability-linked loans will reduce finance costs for businesses that proactively help the transition to a more sustainable economy; and Aspiration’s new credit card will enable consumers to work toward a ‘zero’ carbon footprint.

Published 3 years ago | About a 5 minute read

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Virgin Money launches sustainability-linked loans

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Virgin Money — a collaboration with Clydesdale Bank and Yorkshire Bank that calls itself a “disruptive force in UK banking” — announced this week it is launching sustainability-linked loans (SLL) for all UK companies. The SLLs, available in late Spring, will reduce the cost of finance for those businesses whose core activities proactively help the transition to a more sustainable economy. Virgin Money is the first bank in Europe to offer such loans in commercial banking.

The methodology behind this was created by Virgin Money in partnership with the Future-Fit Foundation, creators of the Future-Fit Business Benchmark — and is delivered through a series of conditional questions assessing current Environmental, Social and Governance (ESG) performance; and helping businesses to prioritise and take action to make further progress. The outcome provides companies with an objective assessment of the negative and positive ESG impacts associated with their business activities, which are a necessary step toward reaching the UN Sustainable Development Goals.

The sustainability-linked loans will launch in late Spring 2021, with a digital version of the questionnaire tool also available for customers and non-customers alike on the Virgin Money website at the same time. For eligible customers borrowing at least £250,000 and with a sufficiently strong ESG assessment, the SLLs will have no arrangement fee. Virgin Money has committed that 5 percent of all its business loans will be to firms driving environmental and social change by September 2022, as judged by the tool.

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Even during a pandemic and global economic uncertainty, becoming more sustainable is important to the majority (85 percent1) of UK SMEs, according to Virgin Money research — but just under half (43 percent) have managed to translate this into clear targets. However, the imperative to do so is clear — as more and more consumers say a company’s environmental and social policies help them make spending and purchasing decisions.

Virgin Money’s research also shows that over half (57 percent) of SMEs say cost has made it difficult for their business to be more sustainable. These costs are often absorbed by the company (29 percent) or shared between the company, customers and suppliers (20 percent).

Graeme Sands, Corporate and Mid-Market Director at Virgin Money, said: “While businesses overwhelmingly recognise the importance of sustainability, many — especially SMEs — struggle to translate good intentions into a clear plan, and are worried about the cost and time involved in implementing an ESG programme.

“This is why we partnered with Future-Fit Foundation — to help SMEs and other businesses manage and measure sustainability. The benchmarking tool enables us to identify those businesses with capabilities that proactively drive other companies or consumers to create a more sustainable society and the loans will help these companies grow faster and help relieve some of the cost pressure. We firmly believe that we, and other banks, have a duty to direct capital responsibly.”

“Every business must play its part in solving today’s most pressing social and environmental challenges — not only to ensure we transition our economy to operate within planetary boundaries and to meet societal needs, but also because it makes sound business sense,” says Future-Fit Foundation co-founder Martin Rich. “Any organisation which fails to step up is at risk of losing its customers and potentially its licence to operate. Getting started can be daunting, not least for SMEs — which is why we’re excited about our collaboration with Virgin Money, who share our vision not only to make a positive impact but to help others do the same.”

To highlight the importance of a strong sustainability agenda for SMEs and provide other banks with advice on how they can help, Virgin Money and Future-Fit Foundation have jointly published a case study report, including details of the assessment tool.

1 Survey conducted by Censuswide: SMEs – 1,006 respondents who are senior decision makers in SMEs, survey conducted 19 to 23 October 2020.

Aspiration's new credit card lets users eliminate their carbon footprint

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Meanwhile, Aspiration — a certified B Corp that empowers customers to spend, save, and shop in ways that protect the planet — recently announced the upcoming launch of its first credit card, Aspiration Zero. The company says the first-of-its-kind credit card will bring the average US user to carbon-neutral status just through regular use — with cash-back rewards when they do so.

“There are plenty of credit cards out there that let you rack up miles; this is the only card that rewards you for taking miles off of the planet,” Aspiration co-founder and CEO Andrei Cherny said. “For the first time, you can have a climate change-fighting tool right in your wallet.”

Each time the credit card is used, Aspiration will plant a tree through its global reforestation partners; and by rounding up their purchase to the nearest dollar, the customer can plant one, too. Through the Aspiration app, members can track their progress in eliminating their carbon footprint through these offsetting activities. Every month in which a user gets to carbon ‘zero,’ Aspiration will reward them with up to 1 percent cashback on all of their purchases.

Aspiration Zero is the latest in a growing arsenal of tools aimed at helping consumers manage their impacts through their purchases. In 2018, Ben & Jerry’s scoop shop in London piloted the world’s first retail platform — powered by the Poseidon Foundation’s “carbon currency” and blockchain — that allows businesses to measure the carbon footprint of financial transactions in real terms. The platform gives retailers and their customers the opportunity to support action on climate change by helping fund forestry conservation projects around the world when they buy and sell everyday items.

Now, with the launch of the Zero credit card, Aspiration has a complete ecosystem of “clean money” products — from accounts that help customers save fossil fuel free, debit cards that let them track the impact of their spending on people and the planet, and investment and retirement accounts that bring sustainable options to all.

People can sign up for the Aspiration Zero waitlist at www.aspiration.com/zero. For every sign up to the waitlist from a personal referral, Aspiration will plant ten trees.