As we’re trying to achieve a more sustainable society, it’s becoming more evident the impact our money choices have. Most people don’t specifically want to support companies that invest in fossil fuels, but sometimes the alternatives aren’t readily available or apparent. 

Emmanuel, home loan broker at Loanscope, explains “Getting a home loan is possibly one of the biggest monetary investments you will ever make, and choosing an ethical lender is a great way of contributing to building a greener future. “

In this article, we’re going to talk about your ethical home loans and the considerations around them. 

What is an ethical home loan?

An ethical home loan is a loan you get from an ethical lender that embraces environmental, social and corporate governance (ESG). 

They are environmentally-friendly and support social change and try to avoid investing in companies or activities that harm the environment or the people. 

Through an ethical mortgage, for example, you’ll support companies that invest in renewable energy as opposed to fossil fuels. 

What is a green home loan?

A green home loan in Australia is a loan that encourages borrowers to buy or build their homes with sustainability in mind. The customers choosing energy-efficient properties are rewarded in a few ways:

  • Higher LVR on home loans (can be up to 95%)
  • Discounted interest rates 
  • Other deals such as cashbacks and rebates from governments 

The Nationwide House Energy Rating Scheme (NatHERS) is used to calculate the energy efficiency of a property and is used to determine if you’re eligible for a clean energy home loan. 

Why is green finance important?

If we want to achieve a sustainable future, we need to look at green finance. 

There are more investments in fossil fuel projects than green projects, and green finance is important because it supports the development of sustainable solutions, environmental and social projects. Projects that aim to reduce climate change and improve the quality of life for all. 

If you want to find out more about ethical lending, a mortgage broker that understands the green loans offerings can help you choose the green banking options you’re looking for. 

What’s the difference between an ethical home loan and a green home loan? 

While ethical home loans and green home loans are used interchangeably, they are not the same. In a nutshell, ethical home loans are loans you get from ethical lenders and green loans are the loans you get for a sustainable property.

With customers increasingly seeking to support companies that deliver more sustainable practices, some corporations are resorting to greenwashing as a way of gaining their clients’ money.

What does this look like? When it comes to green home loans, the lender might offer discounts if the property has, for example, solar panels, but it doesn’t necessarily mean that they are a fossil-free lender.

Ethical home loanAn ethical home loan works like a standard home loan, but the lenders you choose to borrow from don’t invest in harmful activities and projects (environmental or social). Ethical finance stands for equality and sustainable development. 
Green home loan Green home loans reward customers for energy-efficient houses based on the NatHERS rating. The energy rating is calculated based on the building materials, dwelling orientation, type of construction, installation of solar panels, LED lights and more.
A lender could give both an ethical home loan and a green home loan

*The differences between ethical home loans and green home loans.

Are ethical home loans available in Australia?

Yes, there are ethical home loans available in Australia. Their number is limited, but generally, in Australia, the definition of an ethical lender is closely interlinked to fossil fuels. 

That’s because fossil fuels are the primary cause of climate change, more specifically the burning of them. The main fossil fuels are coal, crude oil and natural gas. When burned, they release large amounts of carbon dioxide which gets trapped in our atmosphere, causing global warming. 

So if an Australian lender doesn’t invest in fossil fuels, it’s generally accepted that the bank is ethical. 

Emmanuel Guignard, Loanscope’s Senior Mortgage Broker and Director, has seen an increase over the past few years in the number of clients interested in supporting ethical lenders. “The market is shifting,” he says. “When we started asking our clients 3-4 years ago if ethical investing was a requirement for them, 2-3/10 would say yes, but only if it was the same price. That number has gone up to 5/10, with people happy to pay more as long as their lender doesn’t invest in fossil fuels.”

If you want to find out more about where your bank stands when it comes to fossil fuels, Market Forces has a bank comparison table noting the bank investments and ethical statements of each.

Are green home loans available in Australia?

Yes, green home loans are also available in Australia. There are many banks that reward customers for buying or building sustainable homes. 

How ethical is my bank?

If you’re wondering if your bank is ethical, here are some things to look for:

  1. It has carbon-neutral operations
  2. Puts customer interests first
  3. Doesn’t invest in fossil fuels
  4. Doesn’t engage in tax evasion
  5. It supports actions such as climate change and social justice 

Ethical banks are transparent about where they invest their money, so it should be easy to find that information. Think about your values and decide what causes are most important to you. 

What are the advantages and disadvantages of green mortgages?

Before deciding what home loan to choose, there are a few further things to know about green mortgages.

Pros Cons 

Ethical lenders generally invest in renewable energy projects, don’t support fossil fuels and are carbon neutral or have policies in place aiming to reduce their impact on the planet. 
Limited lenders

Ethical lending is still a fairly small portion of the market, so you’ll have fewer lenders to choose from.
A better future

Ethical lenders support other businesses and initiatives that positively impact the local communities and economy. By choosing an ethical bank or independent lender, you are actively supporting your community. 

Choosing an ethical lender might not give you interest rate discounts. But for many, paying a bit extra for an ethical mortgage is worth it when considering the last-longing impact.

*Pros and cons of green mortgages from ethical banks. 

How to get a loan from an ethical lender 

If you’re looking for a home loan, you’re in the right place. At Loanscope we work with over 30+ lenders, including ethical lenders. Our knowledgeable team can help you figure out where a bank stands when it comes to fossil fuel investments and how to secure a loan with a lender that’s not engaging in environmentally harmful practices. 

Contact us today for an obligation-free chat and we can help you find the right option for you. 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Emmanuel Guignard (MBA)
Director & Principal Mortgage Broker
With over 15 years’ experience in the finance industry and a recently completed MBA in Financial Planning, Emmanuel leads the broking team at Loanscope. His experience includes working with a wide range of property investors, from first time buyers to investors with large property portfolios. This includes handling complex applications involving trusts, company structures and self-managed super funds. He also operates as a qualified mentor to other mortgage brokers via the FBBA mentor program.
Emmanuel Guignard