The finance to turn sustainability goals into practical action
There has been a steady increase in demand from SMEs for sustainability related or green finance over the past number of years. Picture: iStock.
The green agenda may have fallen foul of the culture wars on the other side of the Atlantic while also encountering difficulties in Europe due to the heightened focus on competitiveness. But green finance is very much alive and well. It integrates positive environmental outcomes into its decision-making framework and offers competitive interest rates to businesses that meet those requirements.
Europe sets the global benchmark for green finance, but Ireland’s position within that market comes with an important contrast, says Julie Byrne, professor of finance, DCU. “On the one hand, Ireland has developed considerable expertise as an international centre for sustainable finance. Dublin is one of Europe’s major investment-fund domiciles, including for funds marketed under the EU’s sustainable-finance framework.
“The Irish State was also relatively early into the sovereign green bond market, issuing its first Irish Sovereign Green Bond in 2018. By 2026 almost €14 billion of proceeds had been allocated to eligible green expenditure.”
On the other hand, Byrne says, Ireland’s domestic green finance market is considerably smaller.
“Corporate green bond issuance remains concentrated among relatively large companies, financial institutions and semi-State enterprises such as ESB. In terms of the overall volume of green debt issuance, Ireland remains well behind Europe’s largest markets, particularly France and Germany.”
As the State’s financial institution that has channelled €5 billion in funding to over 67,000 Irish SMEs to date, the Strategic Banking Corporation of Ireland (SBCI) is a strong supporter of green finance, says Maeve Cotter, senior manager, sustainability lending, SBCI.
“Our primary green finance support is the Growth and Sustainability Loan Scheme (GSLS) for eligible SMEs, farmers and fishers, to finance their growth, resilience, and environmental sustainability efforts. The scheme had an initial capacity of €500 million and offered loans ranging from €25,000 to €3 million, with terms of up to 10 years.
“The scheme mandates that a minimum of 30 per cent of total lending be directed towards environmental sustainability and climate action projects; green loans of less than €250,000 will get a minimum discount of 2 per cent and greater than €250k will get a discount of 1.25 per cent.”
In addition to the GSLS, Cotter says that the SBCI launched a €50 million Green Transition Finance Fund (GTF) in partnership with Business Venture Partners in September 2024. This fund offers loans from €500,000 to €5 million for terms of up to 10 years at competitive rates.
“It offers flexible transitional capital, financing companies based on a mix of asset and cash flow underwriting, on a senior or subordinated basis, and with dynamic repayment structures.”
Barriers to investing in their transition for SMEs include identifying the most appropriate investment, assessing the cost and expected return of the investment and financing the upfront costs associated with that investment, says Edel Shine, head of sustainability transformation at AIB.
“It’s important for businesses to seek the right financial support and expertise to help them understand their options, prioritise investment and turn sustainability goals into practical action.”
There has been a steady increase in demand from SMEs for sustainability related or green finance over the past number of years, says Cotter. “Since the launch of the GSLS, the scheme has experienced strong demand, with participating lenders fully utilising their allocations.
“In recognition of this strong uptake, the Government has recently approved both an expansion of the scheme and a three-year extension of its duration. It is expected that the scheme will reopen in autumn 2026.”
A business should not assume that qualifying for a “green” loan will automatically result in significantly cheaper borrowing, says Byrne.
“We have seen some evidence of an interest-rate advantage in Ireland, and there can also be advantages through the terms of finance. Some green-finance schemes can offer longer repayment periods, discounted interest rates or other favourable terms.
“What happens after the investment is probably more important for businesses. If green finance allows a company to invest in more energy-efficient equipment, for example, the reduction in operating costs might ultimately be worth far more than a slightly discounted interest rate. Businesses that reduce their reliance on fossil fuels are also less exposed to future shocks such as energy price volatility and increased carbon costs.”
