Driving Environmental Change: Financing Opportunities for SDG-Linked Projects
Sustainability is one of the most-discussed topics in business today. Encouraging responsible resource management, sustainability efforts refer to a company's strategy and actions to reduce any adverse environmental or social impacts stemming from its operations.
One study has found that more than two-thirds of large U.S. companies have put dedicated budgets in place for sustainability reporting. In Canada, 70% percent of companies have set net-zero commitments by 2050, and 66% have set interim reduction targets for 2030.
As sustainability becomes a priority for companies, financing becomes a priority, too. The good news is that financing for sustainability projects is more prevalent, more innovative and more customized than ever.
SDG project financing
Sustainable Development Goals (SDGs) are a collection of 17 interlinked global goals developed by the United Nations General Assembly. Several of those 17 goals directly address environmental change. SDG 13 speaks to "Climate Action." SDG 14 concerns "Life Below Water," while SDG 15 concerns "Life on Land." Other goals that address clean water, sanitation and sustainable communities have significant environmental components.
To drive environmental change and make progress on these goals, companies are learning that SDG financing must go far beyond traditional leases and sustainability loans. Whether it’s to install energy-efficient lighting systems or build LEED-certified campuses, innovative financing providers are developing new, unconventional solutions that are smart and efficient. Some examples include:
- Energy-as-a-service (EaaS). EaaS is a business model that gives a company access to energy management service without incurring upfront costs. Companies pay for energy usage as a subscription service, essentially renting the service instead of owning it. The provider handles installation, maintenance and monitoring. Costs are predictable. Plus, the monthly (or other periodic) fee companies pay is often based on the energy savings achieved.
EaaS financing programs are popular for energy-efficiency projects, such as HVAC system upgrades, and installation of LED lighting, solar panels and automation systems. - Electrification-as-a-service. This is a unique financing opportunity in the transportation industry, where dealers are moving to electrify fleets. Third-party providers take care of the maintenance, deployment and operation of the charging structure for electric vehicles. Electrification-as-a-service is also known as charging-as-a-service (CaaS).
- Power purchase agreement (PPA). In a PPA financing model, a company purchases energy (such as electricity or natural gas) from a third party (such as an energy developer) at a fixed rate. The third party develops, builds and maintains the system that generates the power. PPAs are frequently used for renewable-energy systems.
- Negotiated contracts. Financing providers may sometimes help develop contracts for clients that build in inflationary factors and pass costs through to end customers.
Critical additional resources
In addition, financing providers that specialize in SDG projects can help in understanding tax credits and incentives offered by government agencies. National, state, provincial and local government entities may provide financing help for clean-energy projects. Experienced experts can implement advanced modeling to determine a company’s best options.
SDG project financing involves more than just financing solutions. Companies need integrated help in the design and implementation of their SDG projects. Strong finance partners have established expert teams of developers, investors, owners, operators and providers to assist clients in achieving their sustainability goals with maximum time and cost efficiency.
Commitment to SDGs
SDG projects can make a business attractive to both customers and investors. But achieving SDG goals, particularly net-zero goals, is a monumental financing challenge. Developments in financing present excellent options, while necessitating careful analysis and consideration in decision-making.
Businesses that work with finance providers equally committed to SDGs will be able to achieve their goals faster and more efficiently. Mitsubishi HC Capital America’s SDG Group helps companies meet their SDGs through financing, investing, services and a network of expert partners. Contact us today to learn how we can help you achieve your SDG targets.
Sources
More than two thirds of large U.S. companies have put dedicated budgets in place for sustainability reporting:
https://www.esgtoday.com/68-of-large-u-s-companies-now-have-dedicated-sustainability-reporting-budgets-ecoonline-survey/
Canadian net-zero commitments:
https://www.teneo.com/insights/articles/the-state-of-sustainability-in-2024-canadian-sustainability-reporting-is-at-a-turning-point/#:~:text=Seventy%20percent%20of%20reviewed%20companies,interim%20reduction%20targets%20for%202030