Sustainable finance won’t help me to put in place my private or business projects. Or will it?
Sustainable finance is not just about investment funds financing large multinational companies.
For your personal projects, whether you are a citizen or an entrepreneur, you can apply for a green loan from your bank.
What is a green loan?
A green loan is a form of financing for eco-friendly or energy saving projects. Its purpose is to incentivise new projects linked for instance to:
- renewable energies,
- energy efficiency,
- pollution prevention,
- responsible water and waste management,
- Environmentally friendly transport, etc.
True or false
Does it mean that I can borrow money to fund projects that will contribute to sustainable transition?
Yes! Companies and private individuals can obtain a green loan to finance their projects, if they qualify for being environmentally-friendly or contributing to the ecological transition.
A few examples:
- buying an electric car, bike or other means of transportation with low carbon emissions
- financing renovation on a building
- installing solar pannels
Are green loans more expensive than traditional loans?
Green loans are not more expensive. They might even be more affordable as banks may grant favourable conditions to finance this type of projects. As Luxembourg has concrete ambitions to reduce its carbon emissions, such loans could also be eligible for state/public financial aids, guarantee and/or tax incentives to support the development of environmental projects, which further drives down their financing cost.
Banks may offer favourable conditions such as reduced interest rates, extended loan maturities or flexible repayment terms.
Why consider this type of loan?
The banking sector is committed to play its role to support the ecological transition. For a bank, it means continuously financing more projects which contribute positively to the environment.
Energy Performance: 70% of Luxembourg residential buildings ranked E or worse.
A recent study conducted by the Ministry of Energy has highlighted the poor energy performance of residential buildings in Luxembourg. About 70% of the assessed buildings were ranked E or worse. A proposed European directive aims to significantly reduce the energy consumption of the real estate sector. National renovations plans will have to be drawn up, with a focus on those buildings with the worst energy performances.
Our society has to mobilise for the climate transition to happen. We must shift away from our consumption and production habits towards sustainable alternatives. That is going to require a lot of financing.
Green loans are therefore an opportunity to engage with your banker to finance the transition to a more sustainable lifestyle.