Sustainability and climate awareness have marched up the list to become a top priority for business owners of all sizes, across all sectors. But funding a green transformation, however noble or necessary, is not cheap.
That’s where so-called green lending comes in. Business borrowers can now obtain low-cost loans to fund everything from an electric vehicle fleet to a premises retrofit or even a wind farm, with small and medium enterprises benefiting from a new Government-backed scheme.
The Growth and Sustainability Loan Scheme (GSLS) was established by the Strategic Banking Corporation of Ireland (SBCI) in 2023 and benefits from a guarantee that has been provided by the European Investment Bank Group, with support from the Department of Enterprise, Trade and Employment and the Department of Agriculture, Food and the Marine.
“The scheme was introduced by the Government to make it easier for SMEs throughout Ireland, including farmers and fishing SMEs, to get low-cost flexible finance to invest in growing their businesses or in making them more sustainable,” says a SCBI spokesperson.
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The scheme is aimed at any SME seeking to invest in improving their business performance in terms of climate action and environmental sustainability or to invest in business growth and expansion. Unlike similar schemes, it is not restrictive, and covers a range of initiatives related to sustainability.
Businesses can qualify as a green enterprise or on the basis that they are seeking to make green improvements to their operations. A green SME is defined as an enterprise that has revenue of 90 per cent-plus concentrated in areas relating to climate action and environmental sustainability – such as renewable energy, energy efficiency, circular economy, waste prevention and recycling.
Farm holdings participating in sustainable programmes such as the Department of Agriculture, Food and the Marine’s Organic Farming Scheme, and members of both the Agri-Climate Rural Environment Scheme (Acres) and Bord Bia’s Sustainable Farming Origin Green programme, also qualify.
A business can use the scheme “to finance investment in better energy efficiency, in vehicles that emit less carbon, such as EVs, in retrofitting buildings or in acquiring machinery that uses less energy,” says the SCBI spokesperson.
Loans under the scheme can also fund investments in tangible or intangible assets, machinery or equipment, research and development, business expansion, premises improvement and innovation.
The uses of these loans are broad as the scheme provides long-term funding for investments in the growth and resilience of a business or for investments in climate action and environmentally sustainable measures. SMEs can access lending terms of up to 10 years on loans ranging from €25,000 to €3 million, with amounts of up to €500,000 available on an unsecured basis.
That gives them a lot of flexibility in terms of how they use the scheme and in tailoring their usage to suit their specific needs, as the SCBI spokesperson notes: “We’ve seen SMEs buy EVs, retrofit buildings to make them warmer and reduce their heating bills, buy state-of-the-art machinery that’s less energy intensive and to grow their business, targeting new markets or diversifying their product range.”
They also note that the scheme was designed using feedback from SMEs, meaning it is easy to access and the application process is straightforward. This is at least part of the reason why demand from businesses has been strong since its introduction.
The GSLS will operate until June 2026 or until the scheme has been fully subscribed, whichever comes first, and already the SBCI is “really encouraged by the uptake”.
Four lenders are now participating in the scheme: Bank of Ireland, AIB, PTSB, and Finance Ireland.
Mary Whitelaw, chief strategy and sustainability officer at AIB, says the bank is focused on helping customers address their carbon footprint, while acknowledging the importance of the green agenda for businesses. All financial institutions have a part to play, she says, pointing out that climate finance globally will need to increase to about $9 trillion a year by 2030, according to estimates from the Climate Policy Initiative.
“The International Monetary Fund has estimated that Ireland’s needs alone to be circa €20 billion per year for the next decade,” says Whitelaw. “Given the scale of the challenge, banks have a major role to play in funding the global transition to net zero and helping protect our people, our planet and prosperity for generations to come.”
She says that by recognising that climate change and sustainability factors will cause many global business models to change, “there is real opportunity for forward-thinking businesses to create a new source of competitive advantage”.
“Through provision of sustainable finance, we will support our customers as they transition their businesses to take account of increasing climate and environmental risks,” she adds.
Whitelaw echoes the SCBI in noting high demand for green lending, which in Q1 2024 accounted for 34 per cent of AIB’s new lending. The bank has issued €12.5 billion of new green lending since 2019, far surpassing its earlier target to deploy €10 billion by December 2023.
“We’ve seen lots of interest from farmers in solar photovoltaic to generate electricity for their own use, as well as reducing energy through on farm-heat pump converters and wind energy,” says Whitelaw.
Eoin Lowry, head of agriculture at Bank of Ireland, says the bank has experienced high demand from agri-sector customers for its Enviroflex loans, discounted loans that reward action taken to improve farm businesses’ environmental footprint. The loans are designed to not only enhance environmental sustainability but also to contribute to farm profitability. Again, the rates are distinctly favourable; currently 5.03 per cent (variable), which is a significant discount to the bank’s standard agri rates for this level of lending – loans can range from €10,000 to €500,000.
“A key challenge for agriculture right now is to improve its environmental footprint,” Lowry says. “The agri sector is responsible for around 38 per cent of national greenhouse gas emissions, with a target to reduce emissions by 25 per cent by 2030. With Enviroflex, Bank of Ireland wants to lead the transition to and acceleration of more sustainable farming practices by providing targeted financial support. A more sustainable farm is a more efficient and profitable one.”
For a farmer to qualify for Enviroflex, they must be part of a sustainability scheme with a partnering processor/co-op and undertaking certain sustainable actions at farm level, underpinned by Teagasc and an Bord Bia sustainability programmes.
“The loan can be used to fund any investment on that farm that is farming in a more sustainable way, such as improved farm buildings, new milking facilities, enhanced animal housing, farm road development etc. It can also be used to fund farm machinery, renewable energy projects and sustainability enhancing measures such as forestry/tree planting, biodiversity projects, or Acres projects,” says Lowry.
Enviroflex is currently being made available to dairy farmers, with Bank of Ireland in talks with stakeholders with a view to rolling it out to other farming sectors shortly, says Lowry.