What Is the Meaning of Green Funding?

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Green funding has taken center state in the 21st century. It represents the financial backing of a business considered environmentally sound and socially conscious. Green funding can be in the form of equity, loans and grants from banks, government agencies, private investors or business entities. Building a business with green funds means focusing on more than just the bottom line. It means making a statement with your business about the importance of safeguarding the Earth and being socially conscious toward all of its inhabitants.

Green Funding Recipients

  • Green funding is sought by individuals, companies and organizations who are producing goods and services that are friendly to the environment, often by having a smaller environmental impact or footprint than alternative products or companies. Examples include renewable energy companies, purchasers of renewable energy generation, organic farms, makers of products that contain few or no synthetic chemicals and clean technology developers.

Private Sources

  • Private investors and philanthropists fund green projects and companies for a variety of reasons and under a variety of terms. Examples of private funders include bank lenders, venture capital funds, foundations and individuals. Private investors may be seeking a strictly financial return and think green investments are attractive on that basis alone. Some investors seek to invest in a company that has a positive environmental impact along with a sound financial return, while still others want to invest in companies that maintain a low environmental footprint.

Public Funding Sources

  • City, state and national governments also offer green funding. Funding can take the form of tax credits, subsidized loans, grants, or contracts. The government typically wants job creation and innovation that makes the country, state or city competitive, as well as environmentally clean. Cash incentives for green companies often expire within a few years of being made available. The political climate contributes to the amount of green funding that is made available through public channels.

Being Green Is Not Black and White

  • A socioeconomic and political battle continues to wage across the globe about definitions, global warming or even the need for being green. The lack of universally agreed upon issues and definitions cause confusion for businesses and individuals. This confusion can lead to a company claiming that it's green, while outsiders disagree and possibly accuse the company of green-washing. Given the complexity of the world's ecosystems, it is very possible for a product or company to be green in one respect, but not in another. Many hydroelectric dams generate electricity without greenhouse gas emissions, for example, so they are considered green in that regard. But they impact the wildlife in the region and prevent salmon from making it upriver to spawn, which goes against being environmentally sound. In the end, those involved in green funding determine for themselves what they consider green.

Green Funding's Future

  • As "being green" becomes more carefully defined, and as metrics for measuring greenness improve, those involved in green funding, including customers of green companies, will continue to finance green projects and businesses. It remains to be seen whether further climate legislation is enacted around the world, which would funnel even more funds to those who can be competitive in a way that treads lightly on the environment.

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  • Photo Credit Digital Vision./Photodisc/Getty Images
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