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Untapped Business Opportunities in Green Finance

Within the field, there is a consensus among experts that large potentials of cost-efficient energy efficiency (EE) investment are currently untapped and steadily expanding due to technological innovation. However, limited access to financial resources – although not the only barrier – represents a serious restriction for the implementation of energy efficiency measures.

From the client’s perspective, the most important issue is to stay within credit limits. For example, household clients will ask themselves, whether they can afford the thermal refurbishment of their home, whereas corporate clients will analyze the impact of the EE investment on the key credit figures and may decide.

Equally, public clients (municipalities, regional and federal authorities, etc.) are tied by budgetary constraints. Therefore, EE investments compete with other investment needs. Even if they are economically viable – usually through repayment of the investment by energy and other operating cost savings – and bring forward additional non-energy benefits, the corporate client may give preference to core-business investment options that promise better return on investment. Similarly, a household or a public building owner may decide to postpone the EE investment because other funding needs are more urgent.

For financing institutions (FI), EE investments are cumbersome, because they are usually small, complex and cash flow is generated from cost savings and not through sales on the market. Therefore, FIs – even if they wish to grow towards “green finance” – have difficulties channeling their resources towards EE investments.

The establishment of refinancing schemes offers new business opportunities for financial institutions (commercial banks, investment funds, etc.), allowing financial institutions to channel their resources towards EE investment and to extend their green financing portfolio.

Within the REFINE project, several case studies have been assessed in detail. This assessment shows, for example, that refinancing of EES projects is a standard procedure in the Czech Republic with several commercial banks offering their services based on well-established and standardized contractual arrangements, whereby the clients are prevailingly from the public sector. A large Belgian bank is offering similar services for the Belgian EES market, whereas in Austria one major EES provider has established a refinancing solution together with an FI belonging to the same mother company. In Spain and Italy, numerous refinancing transactions have been implemented by a private fund manager investing in sustainable energy infrastructure. In Latvia, a refinancing scheme has been developed specifically for residential building refurbishment.

Summing up from a financier’s point of view, refinancing schemes offer the following advantages:

  • Promising and future-oriented market of energy efficiency services with large untapped investment potentials: The below table presents an estimate of the addressable market potential in the EU based on the PRIMES-study of the European Commission (2016).
  • Extension of the green finance portfolio (beyond typical renewables projects)
  • Early mover advantage: Although a handful of refinancing schemes is already in operation the competitive level is still low.
  • Operational and technical risks are extremely low because they are generally covered by the EES provider (savings are sometimes guaranteed), and at the point, in time when refinancing happens, the project has already run for a number of years.
  • The financial institution carries only the credit risk of the client – and in future, this risk could be further decreased by public guarantee funds.
  • Transaction costs can be reduced through bundling of smaller projects: for example, when the refinancing institution arranges a framework contract with the EES provider.



Table: EE Investment gap in the EU and scenarios for the volume of a secondary market for investments in EES.


Investment Gap Potential investment initiated by EES providers Share of investment refinanced on secondary market [million EUR]
[million EUR] [%] [million EUR] 50% 60% 70% 80%


30 1.200 600 720 840 960
Buildings – households


10 8.700 4.350 5.220 6.090


Buildings – tertiary 45.000 60 27.000 13.500 16.200 18.900




  36.900 18.450 22.140 25.830 29.520

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