AIB Group (OTC:AIBRF) has announced a significant expansion of its commitment to sustainable finance, aiming to increase its climate fund to €30 billion and ensuring that by 2030, 70% of all its new lending will be directed towards green or transition projects. This move comes as part of a broader trend among major banks in Europe and the United States, where a collective pledge of €15 trillion has been made towards sustainable finance by the end of the decade.
In the past year, AIB allocated €3.3 billion to green finance out of a total of €12.6 billion in new lending. Despite this effort, the bank has faced scrutiny for what some consider vague criteria for transition finance. Critics argue that this could inadvertently fund companies that are not fully aligned with environmental goals, citing examples like telecoms for teleconferencing services or more profitable cattle farms.
Analysts from Davy anticipate a decrease in property lending but note the potential for growth in green mortgages. These financial products are designed to incentivize energy-efficient home purchases and could represent a key area of development for banks looking to bolster their eco-friendly credentials.
However, only two major banks have reported potential revenue from these sustainable finance efforts, underscoring a communication gap with investors regarding the profitability of such initiatives. Fernando de la Mora from A&M highlights the difficulty in comparing banks' sustainability efforts due to inconsistent definitions and the inclusion of social projects alongside environmental ones.
In parallel developments, under CEO Flavio Cattaneo's leadership after Francesco Starace's tenure left Enel (BIT:ENEI) with a €60 billion debt, the energy company is shifting its focus. Enel is now prioritizing stable investments such as grids in Spain and Italy over high-risk renewables in Latin America. With cost-cutting strategies in place, Enel aims to reduce its net debt from over three times EBITDA to just 2.3 times by 2026. This strategic repositioning marks Enel's transition towards operating as a traditional utility company with regulated returns.
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