Investing in green technologies and projects can be an expensive and risky undertaking, particularly where relatively new and untried technologies are involved, where there is uncertainty about market demand, or where the existing regulatory environment makes it difficult to create a competitive and sustainable business.
Small business owners in South Africa who are willing to brave these difficulties and specialise in green projects can source ‘normal’ start-up and growth finance from sources such as banks, development finance institutions, friends and family and their own savings. Interestingly, some local institutions are launching green funds specifically aimed at supporting eco-preneurs.
For instance, Anglo American has launched the Zimele Green Fund which will make R100 million available to small businesses focusing on environmentally sustainable projects. The Industrial Development Corporation (in partnership with KfW), has launched a R500 million Green Energy Efficiency Fund to invest in energy efficiency and renewable energy projects.
The upcoming COP17 Conference has placed the spotlight on the proposed Green Climate Fund, which will support projects, policies and programmes related to climate change mitigation and adaptation in developing countries. As originally conceived, the Fund would disburse US$100 billion a year in the form of grants and concessional loans to developing countries.
A Transitional Committee made up of 40 United Nations member countries (including South Africa) has been appointed to design the Green Climate Fund, deciding on key issues such as how to source and manage funds, how to monitor and evaluate the Fund’s performance, and governance and institutional arrangements (e.g. the legal status of the Fund). A draft version of the Fund was completed in October 2011 and will be presented for discussion and ratification at COP17. Once finalised, this could potentially be a significant resource for South African businesses.
Other green funding options for small businesses include Climate Investment Funds, a collection of World Bank- administered trust funds for investments in areas such as clean technologies and renewable energies. In addition, the Special Climate Change Fund is administered by the Global Environment Facility and funds projects related to adaptation, transportation, agriculture, and waste management. It seems that green projects are gaining prominence locally and internationally, backed by the necessary funding for entrepreneurs.
However, small business owners should not expect that the terms and conditions of funding for green projects will be any less stringent than those for any other type of funding.
Small businesses are still expected to demonstrate viable and scalable business models, and to adhere to good business management practices.