In a recent interview for TBC Bank’s Business Blog, the Caucasus GEFF’s Project Manager, Gernot Kuhlisch, answered questions about green economy and financing, the GEFF in Georgia, its activities, cooperation with local financial institutions and projects implemented since the launch of the programme.
Below is the full text of the interview.
Can you tell our readers what “green economy” means?
Broadly speaking, a green economy is loosely defined as an economy that aims for sustainable development without degrading the environment. A green economy enhances societal welfare, combats poverty and achieves social justice. One of its most promising measures is implementing green economy investments. To foster such investments, the GEFF provides different levels of support, such as technical and financial assistance for selected commercial banks and local businesses.
Could you elaborate on “green economy investments”? What does it mean to say that an investment is “green”?
Green investments are for projects whose purpose is to benefit the environment. Within the GEFF we distinguish between investments related to energy efficiency, to renewable energy and to resource efficiency.
Our criterion for energy efficiency investments is savings of at least 20% in energy consumption and/or CO2 emissions. Among others, energy efficiency investments include refurbishing the building envelope of a kindergarten, purchasing new equipment for a production plant, and installing efficient industrial heating, ventilation and air conditioning.
With regard to renewable energy, the criteria are met if the investment exploits renewable energy resources. To give you a few examples, hydropower plants, solar water systems and solar PV power plants are typical RE investments. For instance, we had a case in which a hydropower plant invested in renovation, helping the company double its electricity generation capacity. The investment paid for itself in just over a year.
Finally, I mentioned a third component: resource efficiency. This is a fairly new topic but it is becoming more and more important as it aims to make the most efficient use of our available resources. In order to give you an idea of what I am talking about, I’ll take the example of water efficiency. The hygiene and sanitary requirements in the industry demand many cleaning processes that use water; very often the water is just taken from the mains, used for cleaning and then wasted afterwards. Here it would make sense to implement water efficiency measures, whereby the water could be recycled and filtered, enabling it to be used several times. Other examples of resource efficiency are drip irrigation and sustainable land management.
It is commonly believed that green technologies are more expensive than “regular” technologies. How true is this?
There are many modern technologies that bring notable benefits and are affordable and inexpensive, for example solar water heater systems, aerators, etc. We also have to look at the bigger picture: a technology that is recognised as being green can initially cost more than a traditional one, but in the long run the savings outweigh the costs. For instance, an energy-efficient heating system, combined with energy-efficient windows and doors, along with insulation, could reduce your utility costs by around 20 to 30%. Multiply that by the number of years that you are going to be living in a home and the savings look quite impressive.
When talking about investments in green technology, I think it is also very important to mention that a lot of local businesses are not fully aware of all the benefits they can get from them:
If you are a producer, you can, for example, enjoy benefits such as improved product quality, increased output and a wider product range. Not to mention increased production reliability, labour efficiency, better working conditions for the staff.
For service providers, typical additional benefits include improved service conditions, better service quality and, crucially, greater customer satisfaction.
The type of business activity is immaterial for green investments: different types of companies – supermarkets, farms, food processors and even fitness centres – will have different investment opportunities as well as associated benefits.
What are some of the green technologies that businesses use? Any specific examples from Georgia?
Businesses in any sector can benefit from installing green technologies. Just recently, a Georgian road construction company in Tbilisi purchased an asphalt production plant that helped it double its production capacity, without increasing production costs.
Another great example from a construction business is a local shopping mall in Gldani which was constructed using energy-efficient sandwich panels; modern heating, cooling, and ventilation systems; an LED lighting system, and energy-efficient elevators and escalators. Overall the company saved around USD 240,000 a year.
We have already mentioned drip irrigation systems, which are rapidly gaining in popularity in both eastern and western Georgia in the agriculture industry.
Production and manufacturing can also greatly benefit from going “green”: there are numerous machines, starting from raw material recycling equipment to packaging lines, etc.
What about households? Should the green technologies (materials) be taken into account before construction, or are there measures an individual home-owner can take to make their home more energy efficient?
If the residential building is in the planning stage, then by all means, green technologies should be taken into account from the start; however, if a family moves into a finished apartment or a home, there are still a number of things they can do to make it more energy or resource efficient.
The majority of green investments in single family homes are related to three aspects:
Every part of the house can be improved by applying specific green technologies. For example, a family can replace old windows and doors with more efficient ones that provide better insulation. They can also install new heating systems, which will enable better control of the indoor temperature. All of these situations offer perfect opportunities for the step-by-step transformation of ordinary homes into green homes.
In our intro, we mentioned that you work for the GEFF. Could you tell us more about it and how it is helping countries transition to a green economy?
GEFF stands for the Green Economy Finance Facility of the EBRD and supports local businesses as well as private individuals wishing to invest in green technologies. The GEFF goes beyond providing credit lines and ensures consistent quality and innovation in the GEFF product and service delivery. In addition, advisory services are available to support local financial institutions and their clients in improving their market practices.
Accordingly, the GEFF is one of the tools that can be used to facilitate the transition to a greener economy. To date, the programme successfully operates in 26 countries. In Georgia, it was launched in December 2019 and has already financed a variety of projects with support from international donors, such as the Green Climate Fund and the Austrian Federal Ministry of Finance.
GEFF has two approaches for financing green investments:
What is the role of GEFF experts in this project? How do you evaluate the efficiency of technologies or green projects?
As I mentioned, GEFF not only provides financing, but also highly individualised support to our target groups, and to do this we need a strongly motivated team. More concretely, we have a local project implementation team which includes a Deputy Project Manager, PFI Relationship Managers, a Marketing Expert and a pool of local technical specialists. Depending on the specific circumstances of certain investments, additional international experts from abroad can be involved on an ad-hoc basis.
Our local GEFF team analysed the Georgian market in great detail together with key local suppliers and we identified a great many products which easily meet the 20% criterion. All of these products are listed on the internet-based Green Technology Selector. The bank just needs to check whether the equipment which its client plans to purchase is registered on the Green Technology Selector. If so, it is pre-approved and the bank generates the associated certificate which is the proof needed to disburse and flag this loan as a green investment under the GEFF.
If the equipment is not listed on the Green Technology Selector, the bank informs us and we immediately start to conduct a technical assessment, which is a very simplified energy audit focusing on this specific piece of equipment. After the call from the bank we usually start investigating the same day.
Can you give us an example of a successful GEFF project in Georgia?
Since the launch of our programme in Georgia, we’ve had a lot of cases, some of them very interesting. We’ve financed everything from a hydropower plant to a road construction company. Many of these cases are described in our Success Stories, which also contains detailed information about the programme and our current financial partners, and how to apply for financing.
However, to give a concrete example, we supported a walnut and almond company wishing to invest in an energy-efficient building for the business. The client decided to completely upgrade its operations in order to ensure the high quality of the products. The first step of the strategic plan was to build a warehouse to store the products as well as a facility for the operations. They applied for GEFF financing and received the investment of more than EUR 200,000 that made it possible to construct an energy-efficient building that will lead to savings of up to EUR 3,000 annually.
Subscribe to our quarterly newsletter