CHUEE Expands Program to Tap into China’s Small and Medium Enterprises Market
Climate change is one of the world’s most pressing challenges today. While public policy is important in addressing climate change, the private sector also plays a significant role in leading economies toward a low-carbon future. As the largest multilateral development institution focused on private sector development, IFC puts great priority in climate business, helping companies operate sustainably.
In China, IFC recognizes the importance of supporting the sustainable development of small businesses, and has designed a program to provide financial and advisory support to facilitate green financing to small and medium enterprises – China Utility-based Energy Efficiency program for small and medium enterprises or CHUEE SME.
Why is IFC focusing on small businesses? Small and medium enterprises represent the core of China’s economy, generating around 60 percent of China’s gross domestic product and providing 80 percent of urban jobs. However, many of these businesses are using outdated and inefficient production technologies that consume large amounts of energy and water, exceeding those of larger domestic companies and international standards. These inefficiencies not only lead to small businesses contributing a large share of China’s greenhouse gas emissions, but also undermine their competitiveness.
CHUEE SME is the next phase of the successful CHUEE program which started in 2006, and aims to reduce energy consumption intensity and greenhouse gas emissions among Chinese small businesses. The new program also represents an effort to contribute to China’s energy efficiency and emission reduction targets outlined in the government’s recent 12th Five-Year Plan.
IFC will cooperate with several select commercial banks to grow their portfolio of loans to small and medium businesses for investments in either energy efficiency or renewable energy.
“The new program acts as a way to use IFC’s international best practice to support small and medium enterprises through local partner banks to invest in sustainable energy projects that will improve their bottom line and their competitiveness,” says CHUEE Program Manager Will Beloe.
In preparation for this new phase of the program, IFC is conducting a study to gain a deeper understanding of small and medium enterprises, their energy usage patterns, and their contribution to China’s economy. The study will select industries that have the most attractive energy efficiency potential for production efficiency improvements, and focus on several provinces where SMEs’ energy consumption are highest. The study will enable IFC to design a finance and advisory service program that will meet small and medium enterprises’ requirements to modernize their production facilities to improve market competitiveness. Beloe says the challenge of tapping in to this huge, yet largely overlooked, market is what makes the program exciting. Once the study is completed, IFC will further develop its finance and advisory services for this market and advance the scope of the CHUEE program.