Hickman Shearer explored “what sustainability and the circular economy looks like for the asset finance industry” at a keynote session at the Leasing Life conference. Tim Chapman, Managing Director of Hickman Shearer was joined by six guests from KPMG, 3StepIT BNP Paribas, DLL, CSI Leasing, PEAC and Siemens Finance. The unfolding discussion explored the challenges and opportunities for the asset finance sector as well as providing guidance on the transition to a low carbon economy.
A deep dive into the automotive, energy and IT sectors revealed insights into how these sectors are evolving and providing opportunity but also uncertainty for equipment lessors. The growing demand for many classes of e-vehicles and e-construction plant despite higher initial cost, uncertain lives as a result of potentially more rapid technological obsolescence and the supply chain issues were all identified as influencing factors. And as the clean energy sector goes through a radical transformational change, with different business models, new technologies and new asset types, equipment lessors are responding to the challenges of funding material capex demands for leading and sometimes unproven technology.
Clearly from the discussions, equipment lessors are in an ideal position to make a vital contribution to the journey to net zero. At the front end by understanding and building relationships with new technology suppliers and operators and by incorporating discounted rates for sustainable or low emission assets.
At the back end by embracing the circular economy as a complimentary lever to decarbonisation in extending asset lives, increasing asset sharing schemes and further developing end-of-life asset recycling. Clear evidence showed how IT asset lessors in particular were building joint ventures to re-process end-of-life equipment.
And finally, through leading by example to measure carbon emissions to combat green-washing and demonstrate a real reduction both internally and with clients. However, again genuine challenges exist particularly in relation to obtaining accurate use measurement and unit metrics. Also, whilst Scope 3 emission reporting is not yet mandatory the tide is only going in one direction that could again be another major challenge for the market.
As sustainability and carbon reduction becomes ever more important, it will be increasingly imperative for it to be measured and reported, with lessors effectively becoming rated.
Will grey assets become increasingly hard to fund as they adversely impact on lessors’ emission targets?
How will lessees be treated by funders if their emission targets are not achieved?
From an asset advisory perspective, Hickman Shearer welcome the opportunity to continue to support the industry by providing residual value advice for emerging low emission assets and emerging technologies. We will continue expand our equipment scoring index of new equipment against sustainable criteria to differentiate between grey and green assets for lessors.
At end-of -life we will continue to incorporate the circular economy into our asset disposal strategy in enabling relevant assets to be re-lifed, others to be recycled but with a zero to landfill target. At our recent sale at Arena Television recycling assets to new users resulted in a carbon saving of 3,687 tonnes of CO² (using MyCarbon calculation and certification).