What is Green Finance

Green Finance is the area of finance that is designed to promote investments that preserve the environment in one way or the other. These investments often involve lowering the use of raw materials, improving efficiency, reducing waste e.g. CO2, NO2, and pollution.  Areas that can broadly be classified as green investments are as follows:

  1. Energy Efficiency – reducing the amount of energy to produce the same amount of products and at the same time often reduce expenses. Examples are:
    • Changing out old higher energy consuming machines
    • Changing old boilers to new boilers
    • Changing old incandescent light bulbs to LED lamps
    • Installing energy efficient heating and air-conditioning
    • Using waste surplus heat in industrial process to reduce energy consumption
    • Upgrading buildings to conserve energy
    • Replacing old with new energy saving vehicles
    • Using electrical and hybrid vehicles
  2. Installing renewable energy thereby reducing coal and hydro carbon fuel consumption such as the use such as diesel, petrol. Examples of renewable energy are:
    • Solar power panels / installations for electricity
    • Solar power panels / installations for the production of hot water
    • Using biomass for the production of heat and electricity
    • Installing windmills for the production of energy
    • Using geothermal energy to heat and cool building
    • Installing hydro power plants that do not severely impact the environment
    • Using wave energy
    • Production of biogas from waste
  3. Installing wastewater plants to reduce waste into the rivers, lakes, sea and ground water, reuse water and rainwater
  4. Installing and reducing air pollution
  5. Recycling and treatment of waste materials, investing in recycling plants and collection of waste e.g. at a municipal level.

Green finance investments and projects can vary from an individual person changing out his / her light bulbs to LED lights, a micro client investing in solar panels for light during the evening, SME’s changing out old equipment / machinery to newer ones, public institutions reducing their energy bills by insulating their buildings to government and public private partnerships to electrify rural communities with solar power, or large projects for hydropower / windmills supply whole cities with power e.g. ocean based wind mill parks providing electricity to up to half a million homes – in the north sea to England / Denmark.

Green finance can be provided by different companies / institutions. These include examples e.g.

  1. Banks
  2. Micro finance institutions
  3. Development institutions
  4. Investment funds / companies
  5. Governments / local authorities
  6. Equipment suppliers
  7. Private investors
Photo@Tha Bar Wa/SBFIC
Photo@Tha Bar Wa/SBFIC
Photo@Tha Bar Wa/SBFIC
Photo@Tha Bar Wa/SBFIC

Green Finance is often done with the cooperation of qualified equipment suppliers – e.g. good quality solar panel suppliers, efficient boiler producers, wastewater equipment suppliers, waste equipment producers and more. Often the customer gets a better deal e.g. discounts on the equipment if they use the special bank / equipment dealer/producer.

The products of the bank / financial institution are designed for the specific type of green investment. I.e. if the energy savings from a new machine repays itself in five years then the credit / financing will be about five years and the savings each month would be the installment size of the loan.

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