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Where to Find Green Funding for Your Business
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Money remains one of the biggest obstacles to establishing an environmentally friendly and sustainable business, but finance concepts like green funding could change that.
While other beneficial environmental tools like carbon capture and storage systems and artificial intelligence models remain an expensive way to mitigate climate change, something as simple as green funding could serve as a more attainable and affordable alternative to going green.
What is Green Funding?
Green funding refers to mutual funds or various means of investment tactics that aim to encourage socially and environmentally ideals and business practices. For example, green funding could financially engage in green transportation, seeking alternative energy sources, or contributing towards more sustainable living habits.
When did green funding start?
Green funding started back in the 90s following environmental crises, such as the Exxon Valdez oil spill that garnered global attention – and increased interest for others to create their financial investments to yield more long-term environmental benefits.
Since then, green funding has grown exponentially – with over 50 billion dollars invested into green funds in 2020.
Can green funding produce an equivalent financial return in comparison to traditional funds?
While it is probable that funds can match the profits of traditional funds, it isn’t guaranteed – and it isn’t the main reason to use green funding in the first place.
It is important to note that the primary goal of green funding isn’t to produce a greater financial return, but to make an investment that contributes to sustainable or environmental ideals whilst also creating more financial resources for you or your company.
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How does green funding work?
What does a company have to do?
Green funding works by creating an investment portfolio that aligns with Environmental, Social and Governance values – otherwise known as ESG.
In order to participate in green funding, a company should seek investment opportunities that strive to reduce energy consumption and support current environmental issues that impact the planet.
In green funding, it’s also important to choose companies that prioritize co-working relationships, customer satisfaction, and the community – even those who don’t directly purchase or collaborate with the product or service in question. This includes complying with gender inclusion, fair labor practices, and basic human rights.
Transparency is also an important factor to be established between all parties involved in the investment or green funds.
Who can use green funding?
Green funding can be used by individuals, companies or organizations that create products or services that pertain to environmentally friendly practices – or any product or service that strives to reduce its overall carbon footprint.
Some examples of companies that make use of green funding are renewable energy companies, those who purchase renewable energy sources, organic farms, and manufacturers of products that are created with clean technology and contain little to no synthetic chemicals that could negatively impact the environment.
Although it isn’t proven that green investments like green funding or socially responsible investing can guarantee better financial returns for the initial investors, green funds present the opportunity to build more environmentally conscious financial habits – which many potential business partners and investors could view as attractive for long-term collaborations and in turn, create better transparency and sustainability within both parties involved in the green funding = project.
What is the difference between green funding and socially responsible investing?
While green funding and socially responsible investing, otherwise known as SRI – are often referred to in the same manner, there is a slight difference to be noted between the two.
Socially responsible investing kicks it up a notch in comparison to ESG or green funding.
ESG investments and green funding are often used interchangeably due to the fact that both strive to financially contribute to products, services, or companies that pertain to environmental, social, an governance values.
Socially responsible investments have a more thorough selection process in comparison to ESG or green funds, as socially responsible investments will only financially partner with parties with ethical ideals in mind. For instance, if a company manufacters firearms or contributes to animal testing, then a company seeking to subscribe to socially responsible investments will turn down that potential financial deal – even if the rest of the investment pertains to the other ESG values.
Socially responsible investors also strive to avoid any potential financial partners that contribute to the production, consumerism, or commercialism of alcohol, tobacco, and other addictive substances. SRI also prevents investments that promote gambling, weapon production, labor violations, and further environmental damage – whether it is done consciously or unknowingly.
In short, socially responsible investments are the same as green investments – just a little stricter in terms of deciding which investments to make.
What are the pros and cons of green funding?
In general, there is one overarching positive element to green funding, and one negative element – though it can be said that the benefits of green funding outweigh the potential setbacks of green funding.
The best part of green funding is the opportunity to cultivate an investment portfolio with positive environmental impacts, such as mitigating the support of companies or investments that rely on fossil fuels, deforestation, or activities that produce excessive carbon emissions. Green funding implies that the investor taking part in the green funding subscribes to the efforts necessary to improve the current state of the environment.
The only potential con to green funding, is that financial returns are not guaranteed to be equivalent to traditional investments. However, if your primary goal is to promote sustainability and mitigate carbon footprint – then this shouldn’t be a deal breaker for you or your company.
Does green funding help fight climate change?
Green funding doesn’t directly reduce the effects of climate change, but it definitely does more to help than traditional investments do.
Since green funding aims to financially contribute towards green products or companies that seek to improve sectors that can overall benefit the environment, such as energy efficiency – in a backdoor manner, green funding does help climate change.
Think of it this way: imagine you’re trying to save something you really want that is out of your price range – like a new phone, laptop, or expensive vacation.
You have to put a little bit of money aside over time to finally reach your goal to be able to buy the product or experience that is currently out-of-reach. Green funding demonstrates the same tactic, except instead of saving up for a fancy trip or new gadget, it’s saving up for a new piece of technology that can help improve energy efficiency and in turn – help improve the environment.
Green funding allows companies and energy sectors to meet their environmental goals quicker through these green investment opportunities.
Is green funding the best investment to take in order to protect the environment?
If you have to choose between green funding, ESG investments, or climate finance – which one is the most effective way to create financial return while also making the world a better place?
When caught deciding between green funding and the other green finance measures that can be taken – the best choice can often be a confusing one to make.
All types of green investments have a beneficial effect on the environment, and the decision of which one to choose ultimately boils down to your company’s missions and financial goals.
Therefore, it can’t be determined if green funding is the best green investment to choose – but it certainly isn’t a bad financial decision to make.
Examples of green funding
There are many places you and your company can seek green funding!
For starters, easy ways to contribute to green funding are through green bonds and green loans.
One of the most common ways to invest in green financing is through green bonds.
Green bonds are investments that aim to support environmental projects and a more sustainable economy, like renewable energy sources or funding towards public transportation that doesn’t pollute the environment.
Green loans, on the other hand – can be used to finance expensive equipment that could benefit the environment – like financing a carbon capture and storage system.
More specific examples of green funding within large enterprises include seeking grants for green funding. In other words, the other way around – instead of making a green investment, you or your company could be on the receiving end of a financial loan that will go towards your environmentally beneficial product or service.
For example, small businesses can apply for The Office of Energy Efficiency and Renewable Energy’s Small Business Technology Transferprogram for green funding. This program offers grants to small businesses or individuals that can prove they have established a fully functioning business before the required due date. Typically, these grants are given to those who can demonstrate their research and future plans to implement those findings into new technologies that will ultimately benefit energy efficiency across multiple industries.
Also, the National Science Foundation, otherwise known as NSF – annually grants almost $190 million to small businesses and start-ups that seek new scientific discoveries to improve society.
Other popular sources for green funding include the Woodland Creation Planning Grant, Business Energy Efficiency Program, Low Carbon Workspaces, and depending on the magnitude of your project – sometimes even the EPA, or the U.S. Environmental Protection Agency can help fund your green project.
Overall, there are many opportunities for green funding – it’s just a matter of finding which one is right for you.
How can you get started in green funding?
There are many places in which your company can look for green funding.
Green funds are most easily found in sectors that strive to improve environmental efficiency: such as in companies seeking to source renewable energy and other energy efficient sectors.
More specifically, places to look for green funding in the renewable energy sector, as it encompasses a wide variety of sub sectors – include seeking green funding in solar energy, wind energy, battery enterprises, and technologies that pertain to energy storage.
Also, financially contributing to any company that produces or sources materials to help manufacturers or sustain these new technologies that improve energy efficiency can also be considered as green funding.
The buildings sector includes builders who use energy-efficient materials, making each building's carbon footprint smaller—whether they're being used for commercial, residential, or office use.
In conclusion, investments that seek to sustain social and environmental values have drastically grown in popularity due to the ongoing crisis of climate change.
Given the fact that green funding is likely to produce the same financial return you would receive otherwise with a traditional fund – there is no reason to not give green funding a chance. It may require some extra time to find the right investment, but in the end – you’ll be benefiting both your wallet and the planet at the same time.
What about Greenly?
If reading this article about green funding your business has made you interested in reducing your carbon emissions to further fight against climate change – Greenly can help you!
Greenly can help you make an environmental change for the better, starting with a carbon footprint assessment to know how much carbon emissions your company produces.
Click here to learn more about Greenly and how we can help you reduce your carbon footprint.
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