New Guide Launched to Help Industries Unlock Green Finance

A new how-to guide released today by the EU-funded Accelerating Industries’ Climate Response in Sri Lanka (AICRSL) programme offers industrial managers practical, step-by-step advice on turning their energy efficiency ideas into bankable projects. The guide, Building a Business Case for Your Energy Efficiency Project, is the latest effort to help close the gap between industry and potential financiers in the green finance space.

“Efforts like this are important because the disconnect between industry and financiers is one of the biggest barriers to scaling green investment in Sri Lanka,” says Kapila Subasinghe, National Finance Expert of the AICRSL Project. As an engineer and a former Vice President of DFCC Bank, with extensive experience in project lending, Mr. Subasinghe understands both sides of the divide. “Banks are not reluctant-and, actually, they’re expected to fund these proposals–the Central Bank has guidelines requiring them to focus more on sustainable investments,” he says. “But the big challenge remains: identifying the project, identifying the saving, and showing how that saving will repay the loan.”

Going beyond the classroom

The new guide is based on a comprehensive 2-day Sustainable Finance training course together with follow-up consultations, delivered by UNIDO as part of the EU-funded project. It takes industrial managers through key topics, from defining sustainable finance to contextualising energy saving initiatives to the applicable business environment and ultimately developing bankable business proposals. “We’ve done a lot of training for industry on how to prepare bankable proposals, and this will continue, but we also want to make this knowledge more widely available,” Mr. Subasinghe says. The new guide is about doing exactly that and taking the training beyond the classroom to a much larger group of industrial managers.

Offering numerous examples and tips, the guide shows companies how to craft energy efficiency proposals that will appeal to banks. It emphasizes two interlinked documents: the business plan, which establishes the credibility and operational strength of the company, and the project proposal, which outlines the specific initiative. Together, they give potential financiers confidence that the company is capable, the project is practical, and the savings are measurable and valuable.

Identifying the project is half the battle

Often, one of the biggest hurdles for industries is simply defining their energy efficiency project. “Sometimes the investment is embedded in a larger project, so you have to carve out the energy efficiency component,” explains Mr. Subasinghe. For example, if industries are replacing machinery, the new equipment might use less energy or reduce waste, but those savings can be hidden within the bigger project.

“To secure funding, companies need to clearly identify what the project is and how it will generate measurable savings,” he says. In the guide, users will find sections to help them develop clear goals, project descriptions and other elements that define their project.

Making the invisible visible

Meanwhile, many industrial managers know how to improve energy efficiency, but translating those benefits into financial terms that satisfy banks can be challenging. “Without proper measurement and verification, the project won’t be considered bankable,” says Mr. Subasinghe.

Unlike conventional projects, energy efficiency initiatives often have no visible cash flow. “The cash flow is the saving,” he explains. “And because that saving is what will repay the loan, it has to be monitored, measured and verified.” This requires detailing in the proposal how savings will be measured, who is responsible, and how often the measurements will take place.

Financiers also expect the assumptions underlying the profitability forecast to be justified, particularly projected savings. “A company might say it will save 15 per cent on its electricity bill, but it needs to explain why 15 per cent, not 5 per cent or 25 per cent,” Mr. Subasinghe notes. “They have to show how they arrived at that figure.” Clear, evidence-based assumptions are critical to demonstrating that an investment can reliably result in savings needed to repay a loan.

Independent verification is also essential. “Companies may internally estimate that an investment will save a certain amount of energy, but lenders need a third-party energy auditor or ESCO to confirm those numbers. This reassures the bank that the savings are real and will be used to service the loan,” he says.

Demonstrating that risks are understood and managed

Understanding and managing risk is another element that industries need to take into consideration when seeking green finance. This topic is also covered in the new guide. Mr. Subasinghe says industries often underestimate how closely banks examine potential risks when evaluating an energy efficiency proposal.

Demonstrating that risks are understood, planned for and manageable, he says, is essential to giving financiers confidence that a project can be implemented smoothly and deliver the expected results.

A guide that stays relevant

Mr. Subasinghe emphasizes that while funding mechanisms evolve, the fundamentals of a strong energy efficiency proposal remain constant. This is why the guide deliberately avoids reference to specific loan products or credit lines, and focuses instead on outlining the principles needed to meet financiers’ expectations for credibility, clarity and evidence.

Asked what matters most when preparing a funding proposal for an energy efficiency project, Mr. Subasinghe puts it simply: “Justify your energy saving, and justify how you will measure and monitor that saving. If you get those two things right, everything else will fall into place.”

You can download your free copy of the new guide here: The guide, Building a Business Case for Your Energy Efficiency Project