Motor finance businesses are creating tools that will play a valuable role in combatting climate change.

The conversation around climate change is taking place with increasing levels of urgency, and business has an important part to play.

The next decade will be crucial for the transition to a low carbon, green economy and everyone has a role to play to make this happen,” points out Richard Jones, managing director of motor finance & leasing for Lloyds Banking Group.

It has also become clear that decisive action is needed, not simple greenwashing.

“The time for vague and unclear corporate promises on climate change is over,” adds Tex Gunning, chief executive of LeasePlan. “The only way to fight climate change is by setting clearly defined and measurable science-based targets – and we call on other responsible global corporations to do the same and align their ambitions with the latest climate science. The IPCC’s recent report shows without any doubt that we are facing an urgent and existential climate emergency, so the time for action is now.”

Alphera Financial Services, the BMW Group’s independent motor finance division, focuses on sustainability to reflect the vision and responsibility of its parent company, one of the early pioneers of battery-powered cars.

“In a year that marks our 15th anniversary of operating in the UK car finance market, we are keen to play a key role in the transition to more sustainable forms of personal mobility,” says Preston Rogers, director at Alphera.

The challenge is a serious one. There has been a 4% increase in transport emissions generated directly by households between 1997 and 2018. Over half a million new petrol or diesel cars have been registered so far in 2021 and approximately a third of CO2 emissions in the UK come from transport.

However, air pollution dropped dramatically during the pandemic as movement was restricted, underlining how a change in petrol and diesel car usage affected emissions.

Rolling out zero emissions vehicles is one way the automotive sector, and motor finance, has a leading role to play in achieving a net-zero economy.

Making a difference

Across the motor finance sector, many firms are introducing new schemes to bring down their carbon footprints while encouraging their customers to reduce theirs too.

LeasePlan said it had committed to setting science-based greenhouse gas (GHG) reduction targets, to prevent the most dangerous effects of climate change and align with the emissions reduction pathways of the Paris Agreement.

These commitments are on top of LeasePlan’s existing goal of achieving net-zero emissions from its funded fleet by 2030.

LeasePlan is also committed to increasing electric vehicle (EV) uptake globally, with its EV solution aiding a rise in orders for EVs and plug-in hybrids to 17.4% in Q2 2021.

“Despite the challenges ahead, I feel there’s a sense of optimism that this is a genuine opportunity for the UK to embrace new areas of economic growth.”

LeasePlan’s EV offering, now available in 20 countries, provides everything needed to start using EVs, including access to personal charging points at home and work.

This year LeasePlan launched its fourth Green Bond, attracting an additional €1bn in investment to help finance and refinance the firm’s growing portfolio of Battery EVs. All these efforts are further enhanced by LeasePlan’s commitment to setting science-based targets as part of its increasingly comprehensive sustainability disclosure process.

LeasePlan is also a founding member of The Climate Group’s EV100 initiative, which was launched around the UN General Assembly in September 2017 to promote EV uptake among the world’s largest companies. Lloyds Banking Group joined the same initiative in 2019, committing to accelerate the transition to EVs by 2030 including a commitment for the Lex Autolease fleet to be net-zero by 2030.

Carbon emissions

Lloyds Banking Group now has the UK’s largest low emission vehicle fleet, more than doubling the number of EVs it finances in 2020.

“We’ve made a number of commitments, including last year pledging to reduce the carbon emissions we finance by more than 50% by 2030,” says Jones.

In April this year, Lloyds also became a founding member of the Net Zero Banking Alliance (NZBA), a UN-convened, industry-led alliance of 43 banks across the world.

“In the simplest form we fund businesses to produce green products and services, and then provide loans and credit to people to buy these products and services,” Jones explains. “This naturally fuels sustainable growth, creates more jobs and is the right thing to do for business and the planet.”

Alphera, meanwhile, is rising to the challenge by introducing the motor finance industry’s first carbon offsetting programme for used hybrid and plug-in hybrid electric vehicle (PHEV) purchases.

“Alphera Zero is a unique finance product that allows consumers to buy a used hybrid or PHEV vehicle and offset its carbon emissions from driving throughout their term of ownership – at no cost to them,” Rogers explains. “We are working with Hampshire-based sustainability experts Carbon Footprint to offset the driving emissions of vehicles financed through Alphera Zero via tree-planting programmes.”

Specific offsetting requirements vary by customer, determined by their vehicle, length of finance term and agreed contractual mileage. Alphera is currently exploring options to expand the scheme beyond the initial partnership with online car sales platform BuyaCar.

Offsetting emissions

“Sustainability is a core part of our strategy and we’re constantly looking for ways to support the car industry as the UK enters the next era of electromobility,” says Rogers. “Alphera Zero offers used car buyers the opportunity to embrace plug-in and hybrid technology while reducing their impact on the environment.”

By offering transparent and innovative products and processes, Alphera is working with and helping dealers or brokers develop profitable, sustainable businesses in the UK. As part of its sustainability investment, the company is also working with industry bodies to help offset carbon emissions from motor finance industry events through a tree-planting programme. In 2020, 200 trees were planted in Alphera’s name, which will offset 60 tonnes of carbon, the equivalent to 146,580 miles in a standard car.

While preventing climate change is in all of our interests, there is also a strong business case to be made for pursuing sustainability.

“Climate change remains one of the biggest issues facing the UK today and the pandemic has emphasised the case for a green recovery,” Jones concludes. “Despite the challenges ahead, I feel there’s a sense of optimism that this is a genuine opportunity for the UK to embrace new areas of economic growth.”