In this episode of The Unicorny Marketing Show, we welcome back Valentina Kristensen from OakNorth Bank. Since her first appearance, Valentina has taken on a broader role as Corporate Affairs Director and shares how OakNorth continues to disrupt the seemingly commoditised world of SME banking.

From customer-centric strategies to the development of proprietary segmentation models, learn how OakNorth balances sustainability, innovation, and entrepreneurial spirit.

What you'll learn:

• The concept of the "missing middle" in SME banking.
• How granular market segmentation enables targeted opportunities.
• Ways OakNorth ensures transparency and speed in lending decisions.
• Insights into OakNorth’s sustainability initiatives and climate risk management.

Valentina’s insights will inspire leaders to rethink traditional markets. Tune in and discover what makes OakNorth’s approach a blueprint for future growth.

About Guest

Valentina is OakNorth’s Director of Growth and Communications. She's a self-professed FinTech nerd and a founding editorial board member of Influence Magazine, the CIPR’s quarterly member magazine.

Links

Full show notes: Unicorny.co.uk

Watch the episode: https://youtu.be/axPqx90Suvw

LinkedIn: Valentina Kristensen | Dom Hawes

Website: OakNorth

Sponsor: Selbey Anderson

Other items referenced in this episode:

Collapse of Silicon Valley Bank

You've probably heard the saying before, if the product is free, the product is you. I would sort of say if the product is amazing, then the marketing is free. We're selling money just like everybody else is selling money.

But how we're doing it with more flexibility, more transparency, an entrepreneurial approach, and speed. We typically here in the market is about four to six months for a no, six to nine months for a yes. And you think about the opportunity cost of that.

It's incredibly high. Just say. Just say it's not one for us. And let the business move on.

Hello, you. You are tuned into the Unicorn Marketing show, and I'm your host, Dom Hawes. What a show we had Last week, episode 100. I hope you enjoyed it.

And today, this is episode 101. So we thought, who could we ask to come on to episode number 101? Why not the person that came onto show number one?

And that person is Valentina Kristensen from Oak North Bank. Now, since we met her in show one, her life has changed a little bit. She has a family. Congratulations.

But also has a new role, which we're going to hear more about today. Now, Valentina is really good at talking about Oak north and their experience.

They're a fascinating company because if you think about banking and business banking in particular, it feels like it's a commodity market. Doesn't feel like there's any room for anyone to get in. But guess what Oak north is doing. They're making a really, really good name for themselves.

And Valentina is about to tell us how. Let's go straight to the studio.

Oh, thanks so much for having me back. It's great to be here in your new studio. Or at least new to me.

It's new small, it's a bit bijou, but it's a bit of works.

It's nice. It's cozy.

Why don't you tell us what you've been up to since we last saw you?

Oh, gosh. I mean, well, so let's say. So, professionally, I've had a promotion. I'm corporate affairs Director, so I now oversee a few additional departments.

Internal, external comms, esg, sustainability, CSR, events, content. And Oak north has done a huge amount which we'll go into, but in short, geographic expansion and product expansion.

And then personally, I think last time I was here, I was pregnant, although I don't think I knew it yet at that point.

Okay.

But I've since had a lovely son, leo, who's about 20 months old.

Well, congratulations.

Thank you.

And so massively increased remit since we last spoke to you, and I think we're going to dig into some of those things today. There are three broad themes I think we're going to talk about.

Firstly, I'm really interested in how Oak north has continued to be able to innovate in a market market that many would see as commoditized and therefore really not a place where innovation is possible. Secondly, a look at how you've evolved into the world of business banking, which again, isn't necessarily seen as a greenfield site by many.

And I want to finish up by looking at something that I know is close to your and your business's heart, which is the real sustainability, that is climate risk and how to plan for the long term. Let's kick off then with the commoditized market.

Oak north bank operates in a market that many people think is commoditized and therefore is hard in which to innovate. But you've managed to stand out. Can you talk to me a little bit about how Oak north identifies opportunities in such a commoditized market?

Sure. So, I mean, maybe just to kind of unpick that a little bit, why is it commoditized?

I think especially when we first came to market, when Rishi and Joel, our co founders, were speaking to the regular about launching a new bank, and everyone sort of thought, well, I mean, commercial lending, it's, you know, it's been done to death and it's just, it's just a race to the bottom. It's just purely about pricing. A business is going to pick whichever bank is willing to give them the best rate.

And, you know, we're not in a position to offer the best rate really, because our cost of funding is much higher than that of the high street banks. Right. So we fund our lending primarily through retail deposits.

We pay a very competitive rate on those deposits, much more competitive than the high street banks. And so, you know, in order to get the margin that we, we want, then we need to charge more for our loans.

So I would sort of say we, we sort of fall between where the high street banks might be on one side and then debt funds are on the other side. We sort of fall in the middle.

How can we then get customers to come to us, even though we're not the cheapest in the market and certainly nowhere near the cheapest in the market? I think it's really a combination of things. So one is the promise that we make to customers.

So speed, flexibility, transparency, and I would say an entrepreneurial approach. And at the end of the day, we are still founder led. Rishi and Joel are in the office every day.

They're leading the business, they're very, very involved. And that really means that we, you know, we live and breathe the entrepreneur.

We really think about what does the entrepreneur and the business owner need, you know, to successfully scale their business. And then we really try to build that into the proposition.

And that's where the sort of the speed, the flexibility and the transparency come, I would say on the back end, the thing that the customer doesn't see is really what you asked about how we identify those customers. And it's really the way we look at the world or the way we look at the economy.

If you think about most banks, they split the economy into about a dozen or so sectors. So, you know, every golf club, every hotel, every restaurant, every bar, every private members club falls in under hospitality and leisure.

Every school, every nursery, every apprenticeship business, et cetera will fall under education. As we've saw in Covid, for example.

You know, that's not a great way to look at the economy because the experiences of those businesses are so, so different.

You know, if you take hospitality and leisure, for example, you know, during COVID it's very possible and it was the case that golf clubs, for example, reopened long before many of the other businesses.

And hospitality and leisure, because you bring your own clubs, it's outdoors, you're, you know, several, you know, several hundred meters away from the next group of people. It's not really the right approach to sort of say, well, it's hospitality and leisure business and what you tend to see through the economic cycle.

And obviously at, you know, for the last 12, 18 months or so, we've been in a, in a less favorable economic cycle.

Then you end up with many banks sort of retracting from certain sectors and just saying, we're not going to lend to retail, we're not going to lend to hospitality and leisure. And what we do is actually we look at the economy, we split into about 274 different subsectors. So we take a very, very granular view.

And that enables us to not only identify the opportunity, but also manage the risk in our view, much more effectively.

So from a marketing point of view, you have a kind of a proprietary segmentation model. Then you're looking at the market in a way that no one else does. And then you're targeting those areas where you see most opportunity.

It's not so much saying, let's go after that particular industry, it's more that we're not saying no to anybody just because they're from a certain industry. Of course, no bank will ever say, we blacklist certain industries at certain times. It's just what happens.

And we've had very explicit emails come through from customers where they say, my bank has decided they're not lending to hotels right now. So I wondered if you guys could help.

And of course, I don't know what those conversations have been, but at least if a business is getting that sense, you know, that's not a good thing.

And from our perspective, it's sort of we're never going to say no because you're, you know, you're from a certain sector unless it's one that we've already said we would never lend to, such as fossil fuels or mining or gambling, for example.

You believe in co creation with your customers as well? I believe is that that presumably is a way that helps you innovate because the larger competitors, the incumbents, can't do that kind of stuff.

I mean, can't, won't, I mean, who knows, right?

I think if you again, kind of rewind the clock back to when Rishi and Joel were first, you know, when the idea of Oak north was but a humble acorn, you know, they were really thinking about what would we want if we were going to a bank and applying for a commercial loan? What was the thing that we needed when we were in that position?

And not just speed in terms of, okay, you've said you're going to give me the loan now how quickly can I get the money? It's also speed in terms of if it's not going to be a yes, then how quickly can you tell me that?

You know, you hear these stories of businesses being, you know, told month after month.

Oh, we're still looking at it this and the other, just say, just say it's not one for us and let the business move on and to go and potentially search for a loan elsewhere. A lot of the time actually it's just because the relationship manager, it hasn't kind of gone up the chain and then back down the chain yet to them.

So in some cases they genuinely aren't in a position to say. But you know, we typically hear in the market is about four to six months for six to nine months for a yes.

And you Think about the opportunity cost of that. It's incredibly high. The transparency, that's kind of the other point.

And we try to go that step further by actually inviting the businesses into credit committee to discuss their borrowing needs directly with the decision makers. And again, what does that give the entrepreneur?

If you think about most of these banking experiences, you have a relationship manager who's going in and pitching to credit on your behalf. And of course they have how many hundreds of other clients. Right.

They're not going to know your business and live and breathe it every day like you do. So who's in the best position to actually talk about your business?

Where it is today, where it's going tomorrow, it's going to be you as the entrepreneur. And the flexibility again. Most, most banks tend to have these very much off the shelf ready made products.

You know, it's sort of like, well, you know, we can't do a revolving credit facility or we can't do a cash flow based loan or what have you and actually saying what does the business need?

And I think this is the other thing because a lot of institutions don't think, if you look at the segment that we're targeting, their high growth businesses are typically growing about 20% year on year. The difference between where you were last year and the difference where you'll be in a year's time is 40%. I mean it's a totally different business.

So you have to be thinking much more flexibly in terms of how you structure the loan and how you service this customer. And that's really where I think it sort of is underpinned by that entrepreneurial approach and really thinking about what does the customer need?

Okay, fine. Well they've said that they need this loan in five days or they want it to be structured in this way.

Let's see how we can make that happen if we want to work with this customer.

You have no idea how much that chimes with me by the way. Since we last met, I was, I have been in that six to nine month, yes, cycle. It was seven months or eight months, maybe even start to finish.

And by the time we actually drew the facility, we were a completely different business than we were when we started. And all the covenants and everything, they just weren't, they just weren't appropriate.

You basically have to hold, you underwrite at that point. And I mean this is, and unfortunately you are just not the anomaly in that.

It's so, so common that you hear this from business owners and it's just crazy because every government has wanted to increase productivity, to increase economic growth. We could do all of those things if we could just get the capital into the hands of these businesses.

And I think the transparency you're talking about as well, I think is really interesting.

Again, from a marketing point of view, maybe that's in P for product, but the fact that you're allowing entrepreneurs in to speak direct to the investment committee, which everywhere else is something that happens behind closed doors, I think speaks to a lot of your product differentiation possibly.

And also that, you know, it's fun meeting entrepreneurs, right? I mean, so Rishi, our co founder and CEO, he sits on credit committee as one of several people.

And you know, I think, I mean, he gets to spend most of his days chatting with fellow entrepreneurs, you know, so I mean, he, he jokes that he's never on holiday because every day is a holiday because, you know, that's what he, he gets to spend his time sitting down and speaking to people who are incredibly passionate about their business and have obviously reached a level of success that they're at a point where they can borrow, you know, and that they're creditworthy.

So they've kind of, they've already kind of made it into that, you know, very prestigious realm of business, which is to actually, you know, make it through your first few years and be profitable.

The other thing that strikes me immediately is that if one accepts that business banking is commoditized, I think it's ubiquitous. I'm not sure it's the same thing. But if one accepts that it is, then one would expect price to be one of the key drivers. Drivers.

Yeah, but you've already, as you've already explained to us, in fact, you're bucking that trend completely because you've identified a segment of the market that needs a different and better service and is therefore prepared to pay more in order to get it. In terms of how you think about your positioning, how do you manage that communication about price?

Because it's quite a difficult thing to get a good balance on.

So I think it goes back to the transparency point. You know, we, we sort of, I mean, even some of our marketing campaigns joke, you know, that you'll pay more with us than anybody else kind of thing.

But you'll, you know, you'll. It'll be 100% worth it. And I think, you know, we're again, very transparent about that from the get go.

But we also say, but hopefully the experience will be, you know, will be miles better than what you've had before.

And I sort of say It's a bit like, you know, if you're going on holiday and I'm going on holiday next week, you know, you can pay for, you know, an Airbnb or you can stay in like a two, three star hotel and, you know, you'll get what you pay for. You know, you'll have to cook your own meals.

Perhaps if you're in the Airbnb and you know, you have to manage your own, check in and strip the bed when you leave and all the rest of it. Or if you want to have a really, you know, five star luxury experience, then great, if you can afford that, then you can pay for that as well.

So I think, you know, from our perspective, you know, we're not talking about double digit percentage points more, we're talking about, you know, 1, 2% more than what you might have with your clearing bank. But hopefully the experience will be, you know, 10x better. So you'll be getting that five star luxury experience.

And if you think about, you know, your experience, how much of a headache has it been, right, waiting all those months and not being, you know, sort of being at this standstill with so many of your decisions because you're sort of saying, oh, we're waiting for that. And then as you say, once you get it, your business is in a totally different place now.

So it's almost like you have to go back to the drawing board and rethink things like covenants and even the original term sheet you got, which is just such a pain. You don't want to be spending all your time dealing with the bank.

There's a point here whether you do talking product or service, you need to look at the kind of the equivalent concept of total cost of ownership too because actually the cost of meeting the reporting requirements when a, when, when a facility is not working is far more than one or two points a year, far more.

And I, but unfortunately the, the default for most business owners that have reached this point in their journey is that they will go to their clearing bank because their assumption is, well, it's the bank that I bank with day to day, they know me better than everybody else. They've got all this years of, you know, my trading history.

Surely if they're, you know, they're the ones who are going to say yes and if they say no, you often will feel like, well, there's no way that another bank, that I'm going to be a completely new customer, that they would, you know, that they would even look at this, which, which certainly in Oaknow's case just isn't true. But, you know, then think again. How many businesses then decide. Actually, you know what, I'm just not going to bother.

I'm going to potentially take out equity or I'm going to think about some other structure. Maybe I might move on from the business.

Or they just will stall their growth plans or grow much more slowly than they could have done if they'd had access to that capital.

So we've been talking about loans, debt, facilities, and we're going to talk about SME business banking in a minute. But you showed enormous growth rates in the lending market.

Did you see obstacles put in your way by any of the big players at that stage or at that stage, were you too small for them to see you as a threat?

Being modest, but also being honest? We're probably still too small for them to see us as a threat, to be honest. I mean, look, they.

And actually, that's what makes it exciting because we've managed to do a huge amount and we have such a small amount of market share. We've still got way more growth to come, you know, and way more businesses that we can serve. Does that mean that they haven't noticed us?

Does that mean that we're not on their radar in some way?

I'm sure, but I also think the reality is that, I mean, again, the way that we look at the world, as I say, I mean, the technology that we've built, which enables us to split the economy into 274subsectors, I mean, you know, that's proprietary. We do, we do actually license it to US Banks as a sort of banking as a service product through our sister entity.

But I can't see them sort of saying we're going to change our whole approach and invite customers into credit committees. So I think they sort of say, well, that's just never going to be what we'll do.

But there'll always be a huge number of customers that, as I say, will just default to us because we're their clearing bank and that, you know, will not think that they can get a loan from anywhere else.

We talked last time about your specific segment, and I think maybe we just need to do a refresher on that. You talked to me about the missing middle. Tell me about that segment that those who are stuck. The missing ones.

Sure. So I mean that's really a term that we came up with.

But I suppose if you wanted to translate that into market terminology then it would be the lower mid market.

So typically businesses with about a million to 100 million turnover, typically no more than 15 million EBITDA and you know, they, they may have about three years trading history, they're typically profitable. But again this is sort of the typical.

It's not to say that that's what you know, are the criteria for us to the minimum criteria for us to consider looking at a business and why are they missing?

So targeting people like you and me. And then they've sort of built the business proposition on top of that. So it's sort of consumer plus. Yeah.

And so those business propositions are really, really good for small micro businesses, you know, where you've got a fairly simple corporate structure, you know, perhaps one or two ultimate business owners, you know, it's a registered entity in one location.

They're not going to have necessarily very complex financial needs or banking needs and they're probably looking for loans of, you know, less than £500,000.

So that's sort of where those players and then you've got additional fintechs like I Walker and Funding Circle where again they've sort of really optimized in that space.

And to be fair, even the big banks have invested in technology and they've got partnerships with the likes of Funding Circle and I Walker to service those customers.

Then you look at the plus 100 million revenue, the large corporates and that's really where again actually those businesses have been pretty well served because you know, you think okay, well there's a 1% arrangement fee on a loan and maybe the business, if it's 100 million plus 10 of a business, it might be looking for a loan of several tens of millions, if not more.

That's going to be top of the entry and you know, they'll throw a big team of people at it and they'll be willing to structure a loan that's very bespoke for that business because the fees that they going to get on that will be, will be significant, significant.

So what you end up with is then this missing middle where you've got these businesses that are sort of, they've outgrown the app based banks but they're not quite big enough to get the, you know, five star experience that the large corporates will be getting. So they end up then with proposition that is really not suited for them, right?

They can't be serviced on an app, they're just not, they're going to be way too small to register in terms of, you know, getting, as I say that, that large corporate experience.

So that's really where Oak north has, has come in and plays and we really service businesses across the UK across sectors but that's typically, as I say, the sort of the lower mid market, 1 million to 100 million turnover, typically no more than 15 million EBITDA.

That was for lending, but you're now doing business banking too. So what, what needs did you see being overlooked? How did you make the decision that you needed to be into business banking.

As well as lending again, if you rewind the clock?

So March of last year, March 23, the collapse of Silicon Valley bank and Oak north put in, unfortunately, an unsuccessful bid for Silicon Valley bank uk. I think we were the runners up after hsbc.

But you know, it was a, that process of going through that I think really made us realize, you know what, we could service these customers and if we're willing to buy a business that, that is servicing those customers with additional products and services today, then why not think about building it? So that was probably a catalyst for some of the thinking we were already doing.

The reality is since we started we've had businesses that have borrowed from us and then said, you know, it's great, this experience is so great when I borrow from you, but then I have to go back to my bank and it's, you know, the same abysmal experience that I normally have.

So we've been funding all of our growth since then with the profits that we've made.

And that means that we have the freedom to invest in these new areas and not be sort of beholden to answering for them in the same way that perhaps you might do if you were sort of relying on VCs to fuel your Runway. So I think that was also part of it.

Then, of course, where we are in the economic cycle and with rates, right, the bank of England base rate after 13 years finally going up. And I think that's made a lot of businesses really have to rethink, you know, their banking.

If you, you know, I, I sort of say up until 18 months ago, my entire adult life, I'd known the peak of interest rates being 0.75%. So everything I'd been taught in terms of, you know, don't save, invest your money, borrow as much as you can because it's so cheap.

And look, businesses would have been having that same advice, right?

And then suddenly you're having to do a complete 100 because now borrowing is much more expensive and it actually makes sense to hold some cash in savings. And businesses have a lot of cash and they might very well be banking with a bank that's paying them nothing on that. Right.

So I think part of it was also just the sort of, it was a perfect storm of those things. And I think in terms of how we're servicing those customers, what's the gap that we found?

I think it really goes back to what I said before about how we look at the economy.

We're trying to build a proposition here with our customers that, that serves and caters to the specific pain points that those customers might be facing. And I can give a couple of examples. You know, about 50% of our customers are in traditional kind of commercial real estate or property.

So SME, house builders, property developers, property investors.

And one of the challenges that they have is that when they're starting a new project, they set up something called a special purpose vehicle or an spv, and they typically have to open a new account for that. They go to a bank. They could have banked with that bank for 10, 15, 20 years and they'll be treated like a new customer.

And they can even speak to their relationship manager, you know, Bill or Jill, and be like, yeah, look, I want to open this account for this new project we're doing. And they'll be like, sorry, but it's going to have to go through the rigmarole and it'll probably be three months at least.

Three months, yeah.

And there's nothing I can do about it. Sorry, it's out of my hands kind of thing. Which is just a total joke, right?

You're going to delay your project, then you're going to be spending all this time dealing with the bank another Example is with, you know, funds or private equity firms or even law firms. It's very typical that you will be transacting large volumes of cash very regularly and they will often get red flagged.

And then, you know, worst case scenario, you have to like go down to the bank with your passport and prove that someone's not threatening you.

You know, a best case scenario, you're on the phone with, you know, a million different people at the, at the organization trying to get this, get this payment unblocked. So we're sort of saying, okay, well those are the pain points for that specific industry or for that particular type of business.

Let's make sure that then we can work to get those things unblocked so that they can get them business moving again. So it's really trying.

You know, we're not necessarily offering products and services that are different to what's in the market, but it's how you offer them. Just like with our lending, we're not offering technically a product that's different.

It's a, we're selling money just like everybody else is selling money. But how we're doing it with more flexibility, more transparency, an entrepreneurial approach and speed.

That's what really brings the proposition to life in a different way.

So often I hear these days people say, oh, you can't differentiate anymore. It's all about being distinctive and all that kind of stuff.

And I want to come onto promotion in a little bit because I think we're doing product and price very well.

Today day you found a very, very clear way of differentiating largely through experience and by being laser focused on the needs of the people that you're serving.

So customers come first and you've modeled your services kind of outside in if you like, when it comes to promoting that kind of service, which is, I mean we talked use the word co create earlier, but it, and it's not necessarily that it's bespoke for each one, but it is very different. How do you go about, about marketing that to an audience? What, what's your thing? Do you advertise or are you doing much more direct?

You've probably heard the saying before, if the product is free, the product is you. I would sort of say if the product is amazing, then the marketing is free.

Because about 80% of our new business comes or our new business pipeline, our qualified new business pipeline comes from unpaid referrals. So that's either businesses that have had a great experience with us and tell other businesses that they know about us.

And look, entrepreneurs, I Mean, one entrepreneur will know 50 other great entrepreneurs like themselves, right? And look, getting someone the ability to get a loan for their business, they will really owe you one.

So, you know, they're very happy to kind of, you know, share the love in that regard.

Wow.

So we went for the first six years of our business without any marketing team.

That's not to say we didn't do any marketing because technically, anytime Rishi spoke, an event, or any time someone does a podcast, that's still marketing.

It was honestly just that we were like, you know what, we've never turned on the marketing tab. Why don't we, and see what happens. And you know, we have a fantastic marketing director, a guy called Hugo who I sit next to.

And you know, I think we work very, very closely, as you should in, in a functional marketing communications team, you should be in each other's pockets because then you can really amplify what the others are doing. But you find a lot of businesses, they're often sort of competing. They're competing, they're competing for budget.

Perhaps one is reporting into the other. And I just don't think that is a structure that really works or yields the best outcomes. So that's just not the way we do things at Oak North.

And I would say today, even today, last year we spent 1.4 million on marketing in the traditional sense, right across every, everything from event sponsorship to paid social. So that's still fractional when you look at how much some of the others are spending on marketing each year.

You've had very much a product led growth strategy which has worked really well. Let's talk about the market there very quickly because the market you mentioned, it A couple of times the last 12 to 18 months or 24.

Do you think we're, we're recovering? Do you think we're flatlining?

No, I definitely think we're recovering. I mean, and I think we've been for a few months now. I think there was a lot of uncertainty in the market.

Obviously we've got a new government in for a few months now and that's really given businesses, you know, at least they can be. Feel reassured that for the next five years, you know, we're going to have a consistent government.

And that then obviously means you've got more business confidence and more confidence, therefore, to look at potentially getting a loan to invest in your, in your business growth.

I think what we've seen more of the last couple of years is not really a decrease in lending because our lending's actually gone up and probably because actually a lot of the other banks have been retrenching. So it's created a bit of an opportunity for us. And I think from our perspective, we always want to be a consistent lender through cycle. Right.

We continued lending through Brexit, we continued lending through Covid, continued lending, you know, over the last 24 months with the cost of living crisis. But it's more what are businesses borrowing for?

And I think that's changed, you know, and also the shape of the book in terms of, you know, different sectors have had more, more growth and more opportunity and wanted to lend more versus some of some other sectors, as you can appreciate, you know, hospitality and leisure, if you're going to go very, very broad. And this is why many banks will, will sort of say, oh, it's in a really terrible place, you know.

Yes, broadly, hospitality and leisure has had a tougher time than many.

Yeah, because obviously people have less disposable income and therefore will be eating out less or, you know, going to the pub less or what have you, you know. But again, as I say, there's always pockets and there's always businesses that will be thriving and doing incredibly well.

And that's the case with many of the customers that we've, we've lent to.

So I think from our perspective, you know, it's, it's, as I say, it's sort of businesses, what they've been borrowing for has changed so, you know, before a lot of it was for growth. I want to buy a new site, I want to expand into a new geography. There's still some of that.

But we've also seen a lot of businesses looking at things like investing and creating employee ownership schemes, you know, so management buyouts, management buy. So different things, you know, buying out equity shareholders.

So either it's for management teams to, you know, to get more ownership in their business or to find a way to kind of unlock some liquidity and give some ownership to their team. So we've seen more things like that. We've also done quite a bit of club loans.

So that's where we're getting the opportunity to work with some larger businesses that might need a larger debt quantum, probably a bit too big to be out to be outside of what we would traditionally do. And we'll work with another lender or a couple of other lenders in some instances to provide that loan.

So that's also been an area that's been of interest and growing for us as a business.

We have five years of stability. We'll see what the budget brings in October and hopefully all the bad news is coming out upfront, but we'll see.

But five years of stability from a business point of view is good news.

Obviously many of us need to think a lot longer term than that and, and that flies in the face maybe of some of the short term, the fiscal short termism that we've seen over the previous few years, or the pressures we're put on to deliver quarter to quarter.

And I think sometimes when you're chasing numbers like that, the bigger issues, and here I'm thinking climate and our long term impact on the planet and the long term sustainability of our business sometimes gets ignored. But this is something that Oak north has taken very much to heart.

Can you maybe explain how you help your customers assess both physical and the transition risks they face when they're planning for properly long term futures?

One of it is, I mean, the reality is that a lot of SMEs, you know, they know what sustainability is, of course, but they do not have a sustainability strategy in place or at least they don't know that they do.

So they might very well be doing things like, yeah, we recycle and yes, we, you know, we, everyone in the company, you know, is driving an electric car, whatever, what have you. So they actually might have already been doing a bunch of things, but then they don't think of it as a sustainability strategy.

So firstly it's just identifying where are the gaps? Because it might be that there are some businesses, and I take an example, one of our customers is a company called Virtue Homes.

Their whole business proposition is around building ultra sustainable net zero homes and they can actually charge a premium for it because there are people out there, very eco conscious consumers who want the idea of living in a home that's heated by geothermal heat or solar panels and that is got amazing cavity wall insulation and double glazed windows and everything else. That for them is a dream. So you have some businesses that are very much at the forefront and leading their charge in their industry.

Then you have some businesses that as I say, actually might be much further along in this journey than they think they are or that they, then they know they are. And then it's sort of identifying them and saying, okay, where are the potential other opportunities?

So another of our of our customers, they basically have a fleet of about 300 vans which deliver cash to ATMs across the UK. These obviously have to be very heavily armored vehicles.

The cost to convert those 300 vehicles into electric vehicles is going to be, it's a huge investment and potentially in many cases, cases depending on the vehicle might not be possible. You have to get rid of it and get a whole new, a whole new vehicle.

So that's something where, okay, there's a potential opportunity and then there are some which you know, are just, again, so they, they're not doing anything today. Maybe they just haven't reached that level of growth or you know, sophistication internally.

Maybe they don't have someone dedicated to looking at this. And so then it's saying to them, okay, well have you thought about this?

You know, here are some other businesses in your, in your similar sector that are doing these things. You might want to have a conversation with them sometimes.

Firstly, you've got to identify, as I say, where the gaps are in the book, where the potential opportunities. Then it's saying, okay, what are the, what are the potential investments? Where are the potential things they could do?

Where are the easy wins and seeing if that's something that those, those businesses might want to invest in, but it's also connecting them with the right stakeholders. You know, there are so many amazing businesses now that are helping SMEs on their sustainability journeys.

And it could be something like, I mean, you've got a radiator here in the room. We met a business a few weeks ago which creates a different kind.

They've invented a new kind of oil that enables a radiator to heat up in a fraction of the time that it takes a traditional radiator and therefore it's way more energy efficient. Now, okay, fine, it doesn't really matter because this is one room.

But when you're talking about, you know, potentially a building with, you know, 50 radiators, then again, you know, that's an investment and that's a potential opportunity to create much more efficiency within the building. Another one of our clients, they create bulbs that can last, you know, like 50 years. So you'll be a customer once and probably never again.

But that's their whole business business model. And so it's introducing SMEs to some of these players who they may not have ever heard of, and we call them green dating events.

So kind of like speed dating, but with, with green businesses. And the businesses get the benefit of knowing that everybody who's in that room is a customer of Oak North. So they've been vetted by us.

They know that these are businesses that have money that have passed our due diligence, that are real businesses. Right.

But also by the nature of them being there, they're clearly invested in wanting to at least look at how they can be more sustainable, even if they're, you know, very much at the nascent stage of that journey.

I think there's loads that marketers can learn from this approach too. Like, we need to think like investors.

So the timelines that you as investors think about and how you analyze the sectors that people are in and the impact that climate will have on those, like, we probably as marketers in whatever industry we're in, we probably need to think the same way. Like, are we overexposed to a sector that is going to be impacted? Hospitality and travel being one?

Right now we know that technology is moving about pace, but EVs aren't all there yet.

Actually, for the sake of that technology and AI, right, needs huge compute power and we don't yet have a solution to how we're going to make that work ecologically, 100%.

And the problem Is that in banking especially, you're used to looking nine quarters out, right, not decades out, which is what you have to do with climate. So it does really require a shift in mindset.

And taking your example there, you know, of looking at different businesses, take hospitality and leisure. I mean, I'm from Denmark.

And in Denmark, you know, they're debating whether to, you know, add a new tax on cattle production because of the greenhouse gas emissions from, from cattle farming. Now that will get eventually passed on to the consumer. So then think about how that would impact the steak restaurants, right?

If it's going to cost them so much more to get that, that beef, they're going to have to charge the customers much more.

So maybe some customers will start to say, you know what, it's a place we go for a really special occasion, or, you know what, let's just go to one of the million, millions of chicken places out there. Right? So I think that you have to think about it through the supply chain. If you take, you know, you said electric vehicles, you know what?

Most we don't, we don't service like Tesla. Right. They're way too big for us to ever be a customer. But, you know, if you think about, okay, how does that go through the supply chain?

An electric vehicle has a tenth of the moving parts of a traditional petrol vehicle. So it needs a lot less set servicing.

You know, you can go, I mean, you can get, you know, in terms of thinking about like an mot, and I say this because our cars didn't pass its MOT and it's going to cost us £950 to fix it. Yes.

No, but I can, I, you know, I can see how, if you've got more people driving electric vehicles, that's obviously going to be, how will those MOTs be impacted? Right, because they're going to be servicing a lot fewer vehicles a lot less often. And actually the things that will need to be.

If you take a Tesla, for example, right, A lot of the changes and upgrades can be done now through the technology. You don't even need to go in and visit a garage. So you have to think about how does an impact the supply chain.

And it might not be today, but you said physical and transition risk. Physical risk is somewhat easier to try to forecast out only because you can look at what, you know, look at past extreme weather events.

So if you take in the uk, flooding is really probably one of the ones that we've experienced right now. Exactly. So we can say, well, actually we can see how this part of the UK how it suffered from flooding before.

We can see how quickly emergency services got there or what was done in order to rectify the situation. We can see what businesses or what buildings have since made changes to their physical infrastructure to make them more flooding proof.

We can look at what insurance is provided based on this being a high area for flooding and so on. There's some data points that you can actually have with transition risk. It is much harder because. Because there's a lot of unknowns. Right.

I mean, let's take in the US with the upcoming election, depending on who ends up in the White House would really impact the direction that things go for things like electric vehicles and even just actually acknowledgement of climate change. Right. So you have to think about how much the political landscape can change. Things also change in consumer demand. Right?

I mean, demand for electric vehicles has been going down slightly. Now, whether that's as a result or a ripple effect of some of the things that are happening politically. And it's also a cost thing. Right.

I mean, people don't have necessarily as much disposal income and therefore going for that more expensive, albeit more sustainable vehicle might just not be a choice that many people can grapple with in the moment.

Yeah, EVs is an interesting one. I mean, I have a theory. It's all about second hand values.

You can't finance them using a traditional lease plan because there's not enough residual value. And there is enough residual value because people don't have confidence in the batteries.

But as soon as people get confidence in the batteries, then that market's back up and running.

Yeah.

Anyway, look, it's fascinating. I could talk about this stuff forever, but we have unfortunately today run out of time. Valentina, thank you so much for coming to see us.

I really enjoyed the chat and I can't wait to see what Oak north does next.

Thanks so much for having me on. It was great.

Isn't Valentina wonderful? I have to tell you, I really enjoyed listening to her and the story she told us about how Oak north is making moves.

So thank you very much indeed, Valentina, for coming to see us. Really appreciate you taking the time.

And thank you to you too for the time that you've given us to watch or listen to this podcast because we know there's loads of choice out there and if you come to see us, well, that means the world to me. On that note, if you have enjoyed it, please, I'd really appreciate you giving a thumbs up and or subscribing if you feel really generous.

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So thanks very much indeed for coming, and, well, I'll see you next week.