Sustainable Finance: Unlocking Capital for SDG and Clean-Tech Projects
Sustainable Development Goals (SDGs) have become an important part of business vernacular these days.
SDGs are a collection of 17 interlinked global goals developed by the U.N. General Assembly, designed to serve as “a shared blueprint for peace and prosperity, for people and the planet, now and into the future.”
Ratified by 190 governments around the world, including Canada and the United States, the U.N. SDGs emphasize the interconnected environmental, social and economic aspects of sustainable development. Companies throughout North America are committing to contribute to a sustainable future, developing their own short-term and long-term sustainability targets.
Reaching those targets – whether through switching to renewable energy sources or becoming fully carbon-neutral – requires resources. Financing providers are stepping up to develop unique and progressive financing programs to help companies with funding for:
- Capital for equipment transition to renewable/green/electric power
- Capital investment in systems, servicing and infrastructure to manage new equipment types and facilitate more efficient operations
- Project development
- Business model initiation and incubation
Funding SDG projects
Financing clean-tech and energy-efficiency projects can take many forms. Every business and every project has unique requirements and will need a unique solution. Along with conventional leases and loans, examples of effective and well-utilized ways to fund SDG efforts include:
- Government funding. Government entities at the national, state, provincial and local levels are all providing significant funding for clean-energy projects. In the United States, state-sanctioned energy-efficiency retrofit loan programs also are available in a handful of states. These programs allow utilities operating in the state to charge a tariff on each customer’s utility bill, the proceeds of which are used to provide funding for energy efficiency improvements. Loans under these programs are interest-free and can be repaid over time through additional charges on the customer’s utility bill. As an example, an owner of a Class A office building installed LED lighting, air system upgrades and new energy-efficient variable flow pumps. The company funded the project with an interest-free loan via a utility on-bill financing program. The measures will generate nearly $70,000 in annual utility savings with a payback of less than 10 years.
- Energy-as-a-service (Eaas).
In EaaS contracts, the savings that energy-efficiency upgrades generate pay for the upfront costs of the upgrades. EaaS can work well for businesses that own their own energy assets (generally infrastructure). - Power purchase agreement (PPA).
In contrast to EaaS, a PPA is a financing option in which a third party (an energy developer) owns the asset and provides service to a company. PPAs can be particularly helpful for companies that do not want or need a clean-energy asset on their balance sheet.For example, a beverage distributor installed natural gas-powered microgrids to provide power and energy resiliency at its distribution facilities. A PPA contract with the developer guaranteed the delivery of 100% of the facilities’ power needs. The distributor projects annual utility savings will average more than $60,000 over the term of the agreement. - Negotiated contracts with customers that incorporate inflationary levers and allow cost pass-through. Similar to how a construction company may build a provision into a homebuilding contract to increase its price if lumber costs exceed a certain level, other types of businesses can build in inflationary levers to mitigate effects of inflation.
- Electrification-as-a-service. Also known as Charging-as-a-Service (CaaS), the model involves third-party providers handling the maintenance, deployment, and operation of electric vehicle charging infrastructure.
Beyond financing
Smart financing for SDGs goes beyond traditional practices. Leading finance providers work with integrated teams of partners that can help businesses in the design and implementation of programs, structures and software to meet their sustainability goals. Strong partner networks of developers, investors, owners, operators and providers help businesses maximize the use of every dollar, and help them navigate the complicated matrix of government rebates, credits and subsidy programs.
Sustainability is now among the top three initiatives for most large corporations. Nearly all European and North American Fortune 100 companies have committed to net-zero obligations during the next few decades, representing massive need for funding. Businesses that work with finance providers equally committed to the SDG mission will be best-positioned to deploy the customized and finance-forward solutions they will need to achieve their targets.
Commitment to Sustainable Development Goals
Mitsubishi HC Capital America is committed to contributing to a prosperous and sustainable future, working to make businesses more sustainable, more efficient and more successful. Our SDG Group helps companies meet their clean-energy goals through financing, investing and services. Contact us today to learn how we can help your business meet its sustainability commitments and goals.