Funding: Green is for go

The power surge in investment in businesses with strong Environmental Social and Governance (ESG) credentials shows no sign of weakening.

With sustainability and the Net Zero agenda becoming increasingly important when it comes to doing business, green finance is also on the rise.

A recent survey of Northern Powerhouse Investment Fund investee businesses revealed nearly a third had used the cash received to reduce their environmental impact.

Three quarters of them had used the finance to improve their environmental practices, with half adopting low carbon technologies and 20 per cent having developed net zero plans.

They include innovative businesses like Skelmersdale based Extreme Low Energy (ELe). The manufacturer of connected electrical solutions received a £750,000 investment from NPIF – Maven Equity Finance, helping it to pioneer a new low-power product.

Its Eco Off-Grid Leisure Kit was created help meet the surge in demand for staycations over the last year.

Sue Barnard of the British Business Bank says: “Green finance has developed over the years. Historically, funds were set up specifically to serve green or ‘impact’ investments however, it is much more commonplace today that any given investment will have some sort of green element.

“Whether it is funding directly for a business working to plug a gap in the sustainability market, or one that is seeking investment to progress its own ESG initiatives, the demand is there and it’s growing.”

She adds: “This growth is enhanced by the collective efforts of businesses, alongside ambitious green investment plans from combined authorities, Local Enterprise Partnerships, Growth Hubs and other stakeholders in the region.”

Sue points out that across Lancashire’s northern border, Cumbria has launched its own green investment plan, “looking to identify and develop transformative opportunities to create sustainable prosperity”.

Jill Morris, partner at Lancashire headquartered business advisory and accountancy practice PM+M, says it is important that businesses realise they don’t have to operate in the green sector to benefit.

She says: “It may be funding for carbon reducing technology or a green project you are looking to set up in a different part of the business. When it comes to sustainability there is wide criteria.”

In some cases, there may be better rates on offer, it depends on the lender and the business.

Jill says it makes sense for businesses to consider all the options available and look to see if the project or investment they are looking to fund has a green angle. “You may be able to use that fact to grow and take the business to the next level,” she adds.

High Street lenders are also joining the sustainability surge. HSBC UK has launched a £500m ‘Green SME Fund’ as part of its commitment to support businesses of all sizes to “transition and thrive” in a low carbon economy.

The fund is available for businesses with a turnover of less than £25m, offering one per cent cashback on loans, starting from £1,000 to help SMEs invest in green activities.

Launching the fund at COP26 last November, chief executive Ian Stuart, said: “Companies of all sizes and sectors have a role to play in the journey to net zero, however the sustainable finance market has been predominately focused on larger corporations.

“It’s critical that access to funds isn’t a barrier for small and medium sized businesses working to achieve lower carbon emissions.”

NatWest has now launched its green loans and asset finance propositions, with no arrangement fees for qualifying SMEs investing in eligible clean buildings, energy, transport and agriculture.

The bank had earlier announced its ambition to provide £100bn of climate and sustainable funding and financing to customers by the end of 2025.

Announcing the loans, Paul Thwaite, NatWest’s chief executive of commercial banking, said: “Climate change is one of the biggest global challenges we face today, and SMEs have a critical role to play in helping the UK realise its green ambition.”

Meanwhile, a new green innovation fund has been launched to help Lancashire SMEs from all sectors transform their ideas into reality in the race to net zero.

Businesses, charities and social enterprises in the county can get up to 60 per cent funding towards projects worth £25,000 to help them deliver sustainable products, processes or services.

The £400,000 scheme is managed by Eco-I North West (NW), a £14m research and development programme connecting SMEs to the knowledge, research facilities and skills of six of the region’s universities, including Lancaster, UCLan and Cumbria.

The new grants will accelerate low carbon innovations from research to commercialisation by match funding prototypes, pilots and demonstration systems.

Andy Pickard, manager of the Centre for Global Eco-Innovation, based at Lancaster University, which delivers the programme, says: “More than 100 enterprises from a wide range of sectors, disciplines and project themes are already collaborating with the partner universities and could double their potential return on R&D investment.

“These grants will further support those already working with the universities and expand the benefits Eco-I NW can offer to even more SMEs, to bring to market even more sustainable products, processes or services.”

Arid Agritec, a crop manufacturer based at Lancaster, is working with the programme to develop its algorithm-based technology to improve consumer safety and reduce waste in global fresh produce supply chains.

Director Dr Wagdy Sobeih says: “Eco-I NW has provided us with invaluable support via funding and coding expertise which has allowed us to build a demonstration app that will allow us to secure full investor funding and bring our technology to the global market within the next two to three years.”