The Central Finance Facility (CFF) Leads the Credit Union Movement in Green Financing

The United Nations Environment Programme (UNEP) defines a green economy “as low carbon, resource efficient and socially inclusive” where “growth in employment and income are driven by public and private investment into such economic activities, infrastructure and assets that allow reduced carbon emissions and pollution, enhanced energy and resource efficiency, and prevention of the loss of biodiversity and ecosystem services” (UN Environmental Programme, n.d).

Within the context of a green economy, a green business “is committed to the principles of environmental sustainability in its operations, strives to use renewable resources, and tries to minimize the negative environmental impact of its activities.” (UNCTAD, 2021).

The Government of the Republic of Trinidad and Tobago (GORTT), through its Draft National Development Strategy (NDS) 2016-2030 envisions “stimulating economic activity, to be funded through innovation avenues such as a green infrastructure fund [which] will support investment in…climate resilient infrastructure; and social infrastructure such as affordable (greener) housing” (Government of the Republic of Trinidad and Tobago, 2016).

Certified green and energy efficient products and materials have been in use locally for a number of years (Bridglal, 2019) though green construction has been slow due to inadequate human and financial resources (Chadee and Stoute, 2017). The GORTT’s recognition of the country’s vulnerability to the adverse effects of climate change has created an enabling environment for the development of sustainable financial products and services (Government of the Republic of Trinidad and Tobago, 2016).

Obtaining funding is a major challenge facing the MSME sector in Trinidad and Tobago which has a conservative and risk averse financial system (Oxford Business Group, 2021). The paucity of customised environmental financial products specifically geared towards green businesses exists since regular commercial loan criteria used for traditional financial products cannot be applied for green loans.  

Within the context of green financing, a green loan involves “financing or refinancing a particular green project…to improve the overall energy efficiency of a home or business premises” or reducing the carbon footprint of an organisation (McCall, 2021). A green project is defined as promoting renewing energies, conserving resources and mitigating the impact of climate change (LBBW, n.d).

Central Finance Facility (CFF), in its capacity as the Chair of the Steering Committee to represent the Credit Union Movement, in collaboration with Teachers Credit Union Trinidad & Tobago, PECU Cooperative Credit Union Limited, Venture Credit Union Cooperative Society, has partnered with the Inter-American Development Bank’s (IDB) EcoMicro Program to provide green financing solutions by:

(i) increasing access to Renewable Energy/Energy Efficiency (RE/EE) products, and

(ii) assisting the organizations to adapt to climate change.

The purpose of the facility is to support Credit Unions in collaboration with key actors in the broader ecosystem to provide new finance instruments to capitalize on opportunities in green financing, while adjusting their risk management models to climate change risk and incorporating climate impact assessment into their internal policies and operations. The potential benefits to be derived by virtue of Central Finance Facility (CFF) and its 3 participating member Credit Unions partnering with the EcoMicro Program are listed in Figures 1 and 2.

CFF and the three participating Credit Unions are on the cusp of helping to promote climate resilience of MSMEs and households in Trinidad and Tobago, through the development of green finance products that will support access to RE/EE technologies and other specialized products. With the risks associated with climate change, by capitalizing on the assistance provided by the EcoMicro Program, CFF and the participating Credit Unions will be credited as being the pioneers and partners in building a viable and sustainable green economy in Trinidad and Tobago. It is hoped that based on the success of this pilot programme, it will be rolled out to the wider CFF membership in future years.