Navigating the path to green funding

Many businesses today are struggling to address the vast range of sustainability concerns such as reducing emissions, responding to growing regulatory requirements, effectively attracting and retaining top talents and balancing their resource allocation between ongoing business and strategic investments. However, despite the myriad of challenges, there is general agreement that we all need to better prioritize sustainability. An important step toward this is assessing how to finance the transition for your own company. One of the various means is green funding from public institutions which will help businesses make the necessary investments to achieve their environmental, social, and corporate governance (ESG) goals. “What’s more, the business environment is constantly evolving and pioneers who adopt a twin sustainability and digital transformation will generate new business value, putting them ahead of the competition,” says Matthias Marescaux, senior manager in the Grants & Incentives team and Corentin Dandrimont, manager in the Sustainability team at KPMG in Belgium.

“It's important to make the distinction between green funding and green finance,” explains Matthias. “While both concepts aim to support environmentally sustainable projects and initiatives, they refer to different aspects of the process. Green funding is a subset of green finance and focuses on providing specific financial resources for environmentally beneficial projects, while green finance is a broader approach that seeks to align the entire financial industry with sustainability objectives by integrating environmental considerations into various financial services and practices. Both concepts play crucial roles in promoting a transition to a more sustainable and environmentally responsible economy.”

“Green funding plays a key role in financing the transition toward a sustainable future for our planet,” adds Corentin. “However, understanding the numerous possibilities available to secure funding, identifying and prioritizing which initiatives to invest in and developing a tangible roadmap to guarantee success is where businesses could use guidance and support.”

“The European Green Deal ambitiously aims to reshape the European Union into a resource-savvy, and competitive economy, with the following key objectives: achieving carbon neutrality by 2050, fostering economic growth that is independent of resource consumption and guaranteeing that no individual or region is left behind in this transformative process,” Matthias shares.

“A substantial portion - specifically 30% - of the European Union's multiannual budget spanning from 2021 to 2028, along with resources from the NextGenerationEU initiative designed to aid recovery from the COVID-19 crisis, has been earmarked for environmentally friendly investments,” Corentin continues. “Furthermore, Member States are obliged to allocate a minimum of 37% of the funds they receive through the €672.5 billion Recovery and Resilience Facility to investments and reforms aimed at advancing climate-related goals. Importantly, all projects funded in this manner must adhere to stringent criteria that ensure they do not significantly undermine the EU's environmental goals.”

“Have you seen the news lately? On one side of the planet there are raging wildfires and on the other side extreme floods. We’ve just exceeded six of the Earth’s nine planetary boundaries. Looking at our society, everyone is impacted, including businesses,” Corentin points out. “For those simple reasons, everyone - not only companies - should be investing in sustainability. And if you don’t start now, it will be too late, and you will be left behind.”

“Sustainability has evolved from being a peripheral concern within corporate social responsibility (CSR) to becoming an essential foundation for ensuring long-term survival and enhancing credibility. This transformation is primarily driven by the intrinsic connection between sustainability and risk management. Forward-thinking sustainability practices now extend beyond merely identifying, preventing, and mitigating potential adverse impacts of business operations,” says Matthias. “Leaders in various industries are actively exploring practical approaches to generate positive impacts and actively contribute to addressing global challenges, all while capitalizing on growth opportunities for their organizations.”

Successful businesses will be the ones that approach their transformation from both a green and digital point of view. The inevitability of global warming's impact on us is indisputable, driven partly by impending legislation and partly by escalating weather events like storms and heatwaves. “In the coming years, new European and Belgian sustainability regulations will (note: some have already entered into force) come into force and companies will be expected to minimize their greenhouse gas emissions and environmental footprint, with a strong emphasis on transparent reporting, based on meticulous data,” explains Matthias.

“Consumer expectations are ever-changing, and your customers may demand greater transparency regarding your resource usage and seek insights into your environmental and social impact. They require this information for their own reporting and procurement processes. Therefore, it's crucial to have the capability to swiftly and easily share this data,” Corentin clarifies. “Additionally, the landscape of growth and innovation capital is also shifting, as financial institutions and investors are compelled to factor sustainability into their decision-making processes. As supply chain requirements increasingly prioritize sustainability, it may be necessary to reevaluate your suppliers and manufacturing processes to ensure alignment with these evolving standards.”

To remain competitive and to stay relevant in an increasingly complex world - while making a positive impact on society - companies need to change their mindset and focus on sustainable activities. What’s more, resources are limited, and they need to be smarter about how they allocate them.

“We live in a fast-changing world and society as a whole is facing many challenges – especially related to climate change. Biodiversity and natural resources are important for human survival. We’ve been pushing mother nature to the extreme and we’ve finally understood that we need to change how we, for example, live, connect with each other, and consume,” reveals Corentin.

Businesses play an important role in making a difference and are often confronted with varying challenges as well as opportunities from, for example, the market, the authorities, and the competition. “Generally speaking, there are two main factors that drive companies to adopt a new mindset and to invest in sustainability: to reduce risks or to seize opportunities. And these opportunities come in various shapes and can influence a company’s diversification, reputation, brand image, consumer loyalty, HR retention and recruitment policies as well as their ability to attract the right investment and funds,” Matthias argues.

Any change or transition needs to be financed. If a company has access to green funding this will bring positive change and create opportunities for a business to reinvent themselves. In turn, ESG criteria help banks and investors determine which projects to invest in. “Since investing in sustainability offers higher returns, investors will be more likely to invest in your company since your rates are good and you have a more robust risk management approach,” Corentin points out.

Ultimately, companies that are “honest” and take this seriously will be more successful in the long run, not just from a profit point of view but also in terms of attracting the right talent as more and more people want to work for companies that make a positive impact.

Companies that want or have to invest in sustainability need to finance these investments. One form of financing is funding - which usually needs to be accompanied by other types of financing. Grants, on the other hand, are the instruments of a regional or European government for which you can apply for funding. “In other words, a grant is an opportunity, while funding is the amount of money you can get.”

In general, there are four key areas that determine which kind of funding you are eligible to receive:

1. Professionalization: linked to the desire to do better (low risk)
2. Internationalization: linked to the desire to expand abroad (mid risk)
3. Transformation/Implementation: linked to the desire to invest in technologies/processes that go beyond the state-of-the-art. It also comprises acquiring the necessary skills and expertise through education and recruitment (mid risk)
4. Innovation: linked to the desire to develop or research something new (high risk)

Essentially, the higher the risk you take the more funding you can have access to - companies that take risks are rewarded.

“EU funds require a higher commitment from the investing company. For example, collaboration within a consortium is often required and the state-of-the-art level to which an investment is benchmarked is much higher. The social impact must be very high and positive of course. Put another way, projects that save lives, enhance life quality, or contribute to equality have a higher chance of getting funded. Regional funding, on the other hand, can be more ‘business’ focused,” continues Corentin. “It's important to note that, while EU-granted amounts are usually much higher, accessing them is more difficult compared to accessing regional funds.”

“If you have an ambition to do better, we can help you,” explains Matthias. “KPMG is uniquely positioned to help companies get from an idea to a tangible result. We can take companies from eligibility to actually making it happen and can accompany them along their full sustainability/ESG journey - from defining a strategy to implementing and reporting, including receiving green funding.”

Our multidisciplinary approach and access to experts with different backgrounds – e.g. scientists, engineers, economists - empowers us to confidently assist companies in their transformation journeys. “We are also able to unite the appropriate partners to guide you and your company toward the right funding with resources available within our organization and international network, including helping to write the grant proposals,” Corentin shares.

“We can act as a sparring partner and trusted sounding board throughout the entire application process, including strategy and brainstorming sessions and subsequent follow-up steps. Such a multi-faceted topic requires a multi-faceted strategy, and we can help you every step of the way,” concludes Matthias.

“We understand that companies struggle with finding the right funding and building consortia,” admits Corentin. “Our insights into best practices and our deep sector knowledge mean that we can assist companies in scoping the projects eligible for funding, writing the funding application and supporting companies over the lifetime of a funded project in terms of reporting and communicating with administrations. We can also help businesses make the most out of existing resources, including exploring any available tax incentives”.

Transitioning to a carbon-neutral economy will necessitate an unparalleled infusion of fresh capital investment, specifically in the realm of green funding and sustainable finance. This funding will play a crucial role in supporting initiatives aimed at curbing greenhouse gas emissions and assisting businesses in adapting to the challenges posed by climate change.

To enhance your organization's sustainability performance, KPMG offers distinctive expertise that extends beyond short-term financial outcomes, placing a strong emphasis on long-term performance and positive environmental impact supported by access to green funding.

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