Europe: EBRD's SEFFs provide long-term funding for green investments

What do the Nina Patic bakery in Macedonia, the Slovak district heating company Sluzby pre byvanie and the Kalinkovichi Dairy Plant in Belarus have in common? They all have benefited from financing under the EBRD’s Sustainable Energy Finance Facilities (SEFFs).

The EBRD SEFF programme extends credit lines to local financial institutions for on-lending to their clients from the industrial, commercial, residential and municipal sectors for investments in energy efficiency and small-scale renewable energy projects.

The goal is to help countries where the EBRD invests to improve their energy balance and avoid greenhouse gas emissions by reducing inefficiencies and diversifying energy supplies. Both are challenging tasks.

“A surprising number of sustainable energy investment opportunities are not recognised as an investment priority,” said Terry McCallion, EBRD Director for Energy Efficiency and Climate Change.

“The expertise provided through our SEFFs helps identify such projects and evaluate their technical and financial potential, thereby increasing the likelihood of them being financed.”

Recognising that investing in the sustainable use of energy and other resources often represents a new area of activity, the combination of dedicated financing for admissible investments and direct support in building capacity to address market barriers has proven to be the key to successful SEFF deployment.

The EBRD operates its SEFFs through a network of more than 100 local financial institutions (banks, microfinance institutions and leasing companies), providing around €500 million in credit lines for sustainable energy projects per year.

Local financial institutions learn how to assess the feasibility of such opportunities and how to develop and promote suitable financial products.

Local investors receive access to a new line of financial products and learn how investing in this area can improve productivity, quality and increase profits.

Of the total number of 95,000 projects financed through EBRD SEFFs, 94 per cent were in the residential sector. In terms of finance, however, industry and commerce received 86 per cent of all disbursed funds, with the residential sector accounting for 11 per cent and the municipal sector for 3 per cent.

Each €1 billion of EBRD SEFF investment avoids the equivalent of carbon dioxide emissions of 2.5 million tonnes each year.

Currently, the EBRD operates its SEFF programme in 23 countries: Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Egypt, FYR Macedonia, Georgia, Kosovo, Kyrgyz Republic, Moldova, Mongolia, Morocco, Poland, Romania, Russia, Serbia, Slovak Republic, Slovenia, Tajikistan, Turkey and Ukraine.

EBRD donors are supporting the SEFF programme with their contributions, which often make the difference between a project succeeding or not.

Tailored to the most pressing needs in the individual countries, the SEFFs create demand-driven, self-sustaining markets by providing know-how, raising awareness and contributing to the creation of a conducive legal environment.

Sustainable energy solutions are identified by experts and appraised as viable investment opportunities, thereby increasing the acceptance rate of local loan applications.

The EBRD SEFFs provide funding and expertise to bring together all players with the goal of achieving lasting changes in how we deal with the generation and consumption of energy. The concept and implementation of the SEFFs is widely recognised as a success.

The Organisation for Economic Co-operation and Development (OECD) writes in a study that credit lines supported by international financial institutions are the main source of long-term funding for green investments in the EBRD’s countries of operations and that the EBRD “is by a large margin the most significant financier.”

Each SEFF investment makes a palpable impact that contributes to the overall programme results.

• The Nina Patic bakery took a €8.3 million loan for the installation of a biomass boiler and modern heat distribution system which led to a 98 per cent reduction of primary energy consumption.
• The Služby pre bývanie heating company invested €300,000 to switch fuel from natural gas to cereal crops and rapeseed, which avoided emissions of 8,600 tonnes of CO2 equivalent per year.
• The Kalinkovichi Dairy Plant is one of the largest milk processing plants in Belarus. The installation of a gas engine and two steam condensing boilers financed by a €1.5 million loan has led to energy savings of 23 per cent, cost savings of over €2.5 million and avoided emissions of 2,900 tonnes of CO2 per year.