News Bulletin: April-June 2019

Volume 16 | April-June 2019

NEWS BULLETIN

EcoMicro project leads by example: showing Salvadorean SMEs that investing in energy efficiency is good for the environment and even better for business

The problem

“Energy inefficiency decreases the competitiveness and savings of Apoyo Integral's home and business customers; generates greater emission of greenhouse gases; worsens the quality of life of customers; and can affect the quality of the MFI's portfolio".

Aware of this immense challenge, Apoyo Integral began implementation of its EcoMicro project in April 2016 in partnership with the Dutch consulting firm, Enclude BV. The main objective of the project was to reduce energy consumption costs by 10% .

In El Salvador, where more than 60% of the energy produced comes from clean and renewable sources, Salvadoran Small and Medium Enterprises (SMEs) continue to face difficulties in accessing renewable energy and energy efficient (RE/EE) technologies that would lower their energy cost. This is largely due to their low investment levels, in turn a result of their limited access to long-term credit.

For Apoyo Integral, however, an institution present in the Salvadoran financial market for over 20 years, innovating and listening to the client had been cornerstones of the institution's growth and made it a leader in the microfinance market. Facing the challenges of climate change, Integral therefore decided to develop and launch an innovative offering of green finance that would allow their clients to increase and accelerate their investment in RE/EE.

To better understand the needs of the customer as it relates to green finance, Apoyo began with a market study, carrying out in-depth interviews with SME clients, energy efficient asset providers and loan officers. What did they find? There was definitely interest from the market in green loans as long as 3 conditions could be fulfilled : (i) the benefits were greater than the costs; (ii) the recovery time of the investment would be short; and (iii) taking on this loan would not affect MSMEs borrowing capacity for working capital.

Armed with these inputs, the team developed a product focused on financing investments in efficiency energy and renewable energy . From there CrediVerde was born, with Apoyo placing 32 green loans in the market valued at US$493,200 over the course of the 3 year pilot. An additional 11 loans valued at US$150,000 were placed in the market post-pilot.

Surely, as with all things, however, such an accomplishment was not achieved without overcoming the learning curve facing both the institutional and its clients.

For one, how could they ensure that credit officers not specializ ed in a technical issue such as energy efficiency could properly place the product? More importantly, how could they get their customers to overcome the lack of understanding of how an investment in energy efficiency could be profitable and lead to a reduction in costs and therefore an increase in earnings.

Their resistance to change limited the incentive to change production methods and adopt practices related to efficient use of energy. Sound familiar?

The solution

"The most critical aspect is to manage a combination of leadership and specialization that will influence the perceptions and attitudes first of the institution's employees and then of its clients".

In response to the demand for support to be able to sell the product well, an EE cost/benefit calculation tool was developed, which allowed credit officers to take basic data on the equipment to demonstrate to a customer how energy cost savings can exceed debt service and hasten the r ecovery time of their investment.

According to credit officers, the EE cost/benefit analysis was a fundamental aspect in the process of closing the sale . The technical specialization enabled Apoyo to generate credibility by demonstrating the evidence of savings.

In addition, Integral management approved incentives, initially for credit officers and later for supervisors and agency managers, to further encourage product placement.

Finally, leading by example, Integral adopted institutional greening measures across its branches. This not only resulted in 26% energy cost savings but a reduction of CO ² emissions of 36.16 tons per year.

"Without a doubt, this is something worth pursuing. Integral has put the effort and has provided all possible tools to facilitate taking this step. It would have been more difficult for us to take that step without the benefits that have been offered to us"

(Juan Gilberto Cañas, Executive Director of the Grupo Publimóvil)

This positive impact went a long way to enable sustainability of the green loan initiative. Customers who made similar investments in solar panels saw 26% energy cost savings, while those who invested in energy efficient vehicles saw 45% energy cost savings.

Understandably , the promotion of green financial services is not a simple task in economies facing strong challenges at the level of the social, political and economic environment; this is made even more difficult where the micro entrepreneur and the credit officer generally prioritize short-term vision over medium and long-term benefits.

Still, f ollowing their experience with the EcoMicro pilot, Apoyo believes that to the extent that more organizations promote the development of financial services friendly to the environment, economies of scale and shared benefits will be generated for Institutions, People and the Planet.

KNOWLEDGE PRODUCTS

Technology for Climate Action in Latin America and the Caribbean

How ICT and Mobile Solutions Contribute to a Sustainable, Low-Carbon Future

Latin American and Caribbean countries are particularly vulnerable to the impacts of climate change.

However, when considering solutions to tackle climate change, the ICT industry is not the first sector to come to mind. It could soon be, however, given that recent advancements have led to the development of high- speed and reliable networks, the backbone of mobile solutions.

With potential largely untapped in LAC, this publication explores how these new technologies can help the fight against climate change and how to minimize the impacts of the digital industry.

Read the full publication here .

Protected Agriculture in Mexico: Building the Methodology for the First Certified Agricultural Green Bond

The issuance of green bonds has grown rapidly in the past several years. However, agricultural green bonds have lagged far behind, because of the difficulties of developing international certifications, such as those of the Climate Bond Initiative (CBI), as well as the difficulties of assessing environmental and social benefits from different technologies in varying geographic and climatic regions.

This paper describes the approach, methodology, analysis, and recommendations used to support a green bond for specific protected agricultural technologies in select crops in Mexico.

The paper concludes with recommendations for defining minimum technological criteria that provide reasonable assurance to stakeholders that the expected environmental and social benefits will be achieved.

Read the full publication here .

Renewable Energy and Jobs: Annual Review 2019

The widespread adoption of renewable energy technologies creates employment opportunities up and down the supply chain. Worldwide, the sector employed 11 million people at the end of 2018, according to this sixth edition of the Renewable Energy and Jobs series.

The solar photovoltaics (PV), bioenergy, hydro, and wind power industries were the biggest employers. Solar PV in particular remained the top employer among renewable energy technologies in 2018, accounting for a third of the sector’s workflow.

Several factors — including national deployment and industrial policies, changes in the geographic footprint of supply chains and in trade patterns, and industry consolidation trends — shape how and where jobs are created.

Nonetheless, the increasingly diverse geographic footprint of energy-generation capacities and, to a lesser degree, assembly and manufacturing plants, has created jobs in a rising number of countries.