The interview of Andro Butkhuzi, Deputy Project Manager at GEFF in Armenia, with Banks.am

- The GEFF programme has been active in Armenia for over a year now. For those who are not yet familiar with this facility, could you please explain the programme and its main purpose?

- GEFF is the Green Economy Financing Facility of the European Bank for Reconstruction and Development (EBRD). It provides finance, advice and incentives to help businesses become more competitive by investing in high-performance technologies and adopting energy efficiency practices. The facility in Armenia is a product of the EBRD, supported by the Green Climate Fund (GCF) and the Scaling-up Renewable Energy Program (SREP) of the Climate Investment Funds (CIF). The facility is currently supporting Armenia’s transition to a green economy with USD 20 million through four local participating financial institutions: ACBA Leasing, Ameriabank, ArmSwissbank and Inecobank.

- GEFF operates in 26 countries across the world and Armenia is one of them. What is unique about our country and why was it chosen for GEFF support?

- The current global trend is to shift towards long-term sustainable and resilient economy that is beneficial not only to shareholders, but to all stakeholders. For Armenia, the adoption of sustainable best practices is vital for increasing the country’s economic competitiveness, decreasing its dependence on foreign energy supply, and protecting the environment.

We see great potential to develop a green economy, i.e. one that aims to reduce environmental risks and ecological scarcities while striving for sustainable development that does not degrade the environment. The Armenian government has strong interest in this matter, as evidenced by its recent legislative changes to ensure a favourable environment for the promotion of a resilient economy.

- What are the current practices of the Armenian business sector with respect to the aim of establishing a green economy?

- There is undoubtedly an increasing trend with respect to investments in high-performance technologies in almost all economic sectors. We observe that both small and large businesses are paying more attention to energy and resource efficiency.

Unfortunately, the old practice of purchasing inefficient, suboptimal as well as second-hand technologies still prevails because many local businesses are yet not fully aware of all the advantages that green investments can bring. Usually, a business owner easily understands the resulting long-term energy cost savings. But these investments come with a lot of other connected benefits, which, depending on the type of business activity and the particular green investment, can be many and varied.

If you are a producer, you can see benefits, such as improved product quality, increased output and a wider product range, not to mention increased production reliability, reduced operational costs as well as enhanced labour efficiency and better working conditions. For service providers, typical additional benefits are better service conditions and service quality, and – crucially – greater customer satisfaction and positive customer feedback.

Regardless of their activity, all types of businesses benefit from green and sustainable investments. Naturally, the investment opportunities and the associated benefits will vary in different areas.

We observe that many business owners still think short-term; therefore, it is important to guide them to focus on long-term gains of green investments. For this reason, apart from finance and advice, GEFF also provides additional investment incentives for certain types of technologies, such as solar water heating systems and solar PV power stations.

- How does GEFF intend to address these challenges and what is your role as project consultant?

- GEFF addresses these issues in its operations for the different target groups:

•    participating financial institutions (PFIs) as the local financers of sustainable investments
•    local businesses as green investors
•    vendors as providers of high-performance technologies

The EBRD supplies credit lines to PFIs, while GEFF consultants provide advice to banks and to investors to guide green investments in a targeted way. For PFIs, our services include advice on structuring green lending strategies, operations, procedures, forms and templates – all that help disburse green loans in a systemic way and establish local expertise and governance for future sustainable operations. We also support banks with targeted green marketing activities, such as joint promotional events with local vendors, and establishing the sectoral or expertise partnerships.

One of our most important activities is staff training and capacity-building for the banks, because this will make a sustainable contribution towards the country’s long-term economic transition.

As already mentioned, there are benefits for local businesses too, as we help them increase their competitiveness by identifying and selecting the most promising potential investments. Our team of local technical experts can visit businesses to analyse their needs and provide targeted consultancy services, which are free of charge.

We also teach and support local vendors of high-performance technologies on how to register and publicise their products in Technology Selector to increase their sales and competitiveness. The Technology Selector is GEFF’s online database of eligible green equipment and materials and currently consists of more than 160 registered vendors nationwide with almost 1,800 products.

This online catalogue makes potential green investments even more accessible for interested businesses, by enabling them to identify, compare and choose the technologies to purchase.  While the banks can make fast decision on a loan, by generating the related product certificates in minutes, which are needed to disburse and flag the loans as green investments under the GEFF programme.

- How different is GEFF from other green initiatives/programmes?

- There are several green finance initiatives and partnerships in Armenia besides GEFF that coordinate their activities to avoid overlapping. For example, only GEFF in Armenia provides investment incentives for certain types of technologies, in addition it has a large number of standardised pre-approved technologies, which are summarised in the Technology Selector.

GEFF’s big advantage is also a local project team of experts, who focus on three work streams: banking and finance, technology and engineering, and marketing. This enables us to address the demands both from banks and businesses and allows us to provide highly individualised support.

Depending on the specific circumstances of certain investments, additional international experts from abroad can be involved on an ad-hoc basis.

- What are the current results of GEFF, and do these results meet your initial expectations?

- GEFF in Armenia launched at the end of 2018. Since then we have successfully financed more than 160 green projects implemented by commercial businesses, which has led to a significant positive impact on the environment. Total investment volume of almost USD 17 million made it possible to save more than 68 GWh/year energy as well as to reduce CO2 emissions by 16 thousand tonnes/year, which is four times more than initially planned for energy savings and twice the expected amount of CO2 savings.

All this is possible thanks to the institutional anchoring of green finance in our four local partner banks and the related comprehensive training programmes. In addition to classroom and on-the-job training as well as webinars for 165 bank staff, specialised workshops have been implemented for more than 150 potential clients and almost 70 vendors.

In addition, as already mentioned, by investing in high-performance technologies and adopting energy efficiency practices, Armenian businesses have become more competitive.

- Do you think that GEFF will reach its goals and sustainable green financing will be ensured in Armenia?

- International programmes such as GEFF play a significant role in initiating and enabling the successful implementation of green finance. However, they can only serve as the starting point in the gradual anchoring of such finance mechanisms.

The EBRD, as a major provider of funds, has a solid track record of financial interventions that encourage businesses to adopt modern sustainable practices and to transition towards renewable energy sources. These interventions also include permanent cooperation with the Armenian government from a legislative point of view. Apart from the EBRD, other international institutions are also working to improve the policy and economic framework in Armenia.

Through the provision of funds and targeted technical assistance, GEFF specifically supports the operations of both Armenian financial institutions and local businesses. The positive results described above show that the development of sustainable green finance in Armenia is on the right path and the situation is only expected to improve.

- How is the current coronavirus pandemic affecting GEFF’s activities?

- The coronavirus pandemic is posing an unprecedented challenge for Armenia, whose economy and financial market are currently enduring a number of financial impacts. Nevertheless, almost all banking services are still available, even lending to certain types of businesses and economic sectors. The financial institutions have already started to adjust to the new working conditions and embrace technology to continue operations and communicate with clients. This crisis will certainly accelerate digitalization in the financial sector.

Even though the banks are focusing on aspects other than sustainable energy financing amid the crisis; the GEFF’s PFIs are continuing their green lending operations. Also, the GEFF team has continued to provide remote support during the lockdown through webinars and screening  loan applications.

Overall, the majority of our activities have not yet been affected, since the GEFF team has managed to deliver programme activities without in-person meetings with bank staff, vendors and other businesses. Of course, the situation could change depending on further developments related to the spread of the coronavirus. We are therefore carefully monitoring market developments and remaining in close contact with all partner banks as well as other market players, such as vendors, selected potential clients and associations.

- GEFF is an integral part of the EBRD. Could you please tell us more about the EBRD’s response to the COVID‐19 pandemic?

- The EBRD is rapidly stepping up support for its regions in the face of the coronavirus pandemic and now expects to dedicate the entirety of its activities to helping the 38 emerging economies where it invests to combat the economic impact of the crisis. As an initial response to the crisis, the EBRD has unveiled an emergency “Solidarity Package” of measures to help companies across its regions deal with the impact of the crisis. A key pillar of the Solidarity Package is a Resilience Framework providing finance to meet the short-term liquidity and working capital needs of existing clients.

The EBRD now stands ready to provide support worth EUR 21 billion over the 2020-21 period. In delivering its support, the EBRD will work closely with other IFIs, including at the country level, to ensure efficient and coordinated responses for economies and clients in their time of need. In parallel with its increased financial support, the EBRD will put an even greater focus than usual on policy support in order to respond to the short- and longer-term consequences of COVID‐19.