A green investment may pay off in only a few years

20. January 2021

It is clear that when a company purchases new equipment contributing to its production, revenue will increase. But sometimes even more revenue can be found on the expenditure side, for example, when we talk about the more efficient use of resources.

Moving towards cleaner nature and a sustainable economy is more important than ever. Estonia and the world as a whole are currently facing several critical climate problems, the most serious of which is the burning of fossil fuels for energy and the emission of greenhouse gases into the air. Even a company that wants to operate for a long time can only do so in a world that lasts.

Last year, LHV Group joined the UN Principles for Responsible Banking and presented its Green Action Plan, which highlights both sustainable banking activities and organisational culture. To begin with, the bank offered financial products that favoured sustainable choices exclusively to private clients, but now it is also possible for businesses to apply for green loans under favourable conditions.

For many businesses, a green investment is also an investment in increasing their efficiency, notes Marko Kiisa, Head of Corporate Financing at LHV. In most cases, the post-investment energy savings cover the repayment of the loan; however, the equipment acquired through the investment lasts much longer than the repayment period. After repaying the loan, all the profits are collected by the business, so profitability and efficiency increase.

‘It is quite feasible to make a green investment pay for itself,’ Kiisa said. ‘I will give one example from Estonia: a company with a large warehouse area invested in an energy-efficient lighting system and renewed its heating and ventilation equipment. The investment amounted to EUR 300,000 and had a payback period of three years, but the equipment purchased will last 12–15 years,’ Kiisa explained. ‘This is a very thought-provoking example and there are many. Consequently, the question arises that if such efficiency is there in the Estonian economy, then why are so few are using it!? It is very difficult for a company to increase its profitability by EUR 300,000 per month through business activities, but there are other ways to do so.’

Last year, many entrepreneurs built solar power plants as a result of state support for renewable energy, which will be paid for electricity sold to the grid over the next 12 years. Although this support scheme will no longer provide funds as of this year, the Rural Development Foundation is still distributing investment support.

According to Kiisa, many entrepreneurs don’t think about the fact that they are using electricity primarily during the day, meaning at the time when the cost of energy is the highest. ‘If a company consumed all or most of the electricity generated by its solar plant, this investment would quickly pay for itself, even without renewable energy support,’ Kiisa explained. ‘This, of course, depends on several aspects, but in most cases the cost can become zero in five to eight years. However, the lifespan of a solar park is several times longer.’

Kiisa believes that a green investment is a victory for the company’s energy use and competitiveness, but also, and above all, it helps to combat an increasingly warming climate. As a company that knows the Estonian economy and local conditions very well, LHV also follows the principles of responsible business. ‘We see that it is not possible to do business successfully and in the long run if it is not done sustainably,’ Kiisa said. ‘This applies equally to a bank, industrial plant, and laundry house.’

Kiisa is of the opinion that if one wants to offer competition in the long run, for example, for a period of more than five years, one has to engage in the environmental and social impacts of business and the transparency of management, otherwise the company will soon become unsuccessful. ‘This is LHV’s finding and our own conscious choice that should serve as an example for others,’ said Kiisa.

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