Investing in energy efficiency: the good news for brokers

With many Australian businesses facing acute and growing cost pressures, energy efficiency has emerged as a priority.

Increasingly, brokers are helping clients upgrade their business assets to more efficient alternatives – turning energy savings into a competitive advantage.

As energy prices escalate and customers demand more sustainable business practices, the investment appetite of many SMEs for energy efficiency is on the rise. What’s more, the financial case is very persuasive.

Recent research published by the Energy Efficiency Council and ANZ found energy upgrades can unlock energy savings of up to 80%, depending on the business function.^[1]  It’s a compelling opportunity that’s impossible to ignore.

Lending for energy efficiency is now a core broker capability

Put simply, energy efficiency means getting more out of every unit of energy – whether that’s electricity, gas, or diesel.

As Cindy Arthur, Head of ESG for ANZ commercial banking in Australia (pictured below), explains, “energy efficiency involves reducing your energy consumption by investing in equipment with a better energy efficiency rating”.

“Which saves costs on a business energy bill and reduces carbon emissions,”  Arthur says.

Businesses across Australia, from manufacturing to services, are seeking energy efficiency, and understanding how to identify these opportunities is becoming a core capability for commercial brokers.

“In their conversations with their clients, being able to spot an opportunity to invest in equipment or lighting which is energy efficient can help position the broker as a thought leader in providing that added value and insight they need to be competitive in the market,” says Arthur.

Brokers can also help their clients improve future resilience and respond to growing customer efforts to measure and reduce their carbon footprint.

As Kypros Kateifides (pictured below), State Manager Asset Finance QLD & NSW/ACT, Commercial Division, ANZ, notes, “businesses in supply chains may already be being asked about their carbon footprint so understanding how energy efficiency reduces costs and emissions could be really valuable” . 

“Energy efficiency is also smart from a competitive advantage point of view as stakeholders and staff may be asking about emissions and sustainability,” says Kateifides.

Energy efficiency, electrification and renewables

The first critical step that a broker can help a business with is improving energy efficiency. This is because the cheapest and most environmentally friendly power source is the one you don’t have to use in the first place.

Here’s an example: a Queensland business needed climate-controlled storage for its products. A broker facilitated finance from ANZ to lower the warehouse’s ceiling and add insulation, so that less energy is needed for heating and cooling.

The business case for the investment stacked up over the payback period because future energy savings offset the principal and interest payments. And after the payback period, the business benefited from higher cash flow and profitability.

Looking beyond energy efficiency, brokers can also help their clients with potential further gains, like investments in:  

• Electrification. This is replacing equipment powered by fossil fuels – such as gas-powered heat pumps and petrol vehicles – with modern electric alternatives.
• Renewable energy. By investing in on-site solar energy generation or establishing contracting arrangements with renewable energy providers, businesses can tap into the cheapest form of electricity generation. ^[2]

Identifying opportunities for energy efficiency

For brokers looking to start conversations with their clients about energy efficiency, there are a few considerations.

“The first step is to focus on the more energy intensive industries – agriculture, manufacturing, food processing, commercial buildings and services, road freight, transport, and warehousing,” Kateifides says.

These industries are all earmarked as opportunities for improvement in the report, Putting Energy Efficiency to Work For Business.

“A great conversation starter is – ‘let's review your financials and energy expenses. Where can we save you money?’ ” Kateifides says.

As energy audits become more commonplace, a broker might then introduce an energy auditor to assess how energy is being used across the business, highlight areas for improvement, and help identify assets or inefficient practices that need updating. The auditor can also provide data for the investment business case.

Government initiatives, such as the instant asset write-off extension, provide limited-time incentives for businesses to invest in energy-efficient equipment and upgrade their assets to better models.

“The instant asset write-off can be used for even simple things like upgrading from a desktop computer to a laptop, which can save up to 70% in energy costs,” says Arthur.

Working with a bank that leads in energy-efficiency finance

ANZ understands the importance of energy efficiency to SMEs and is providing brokers with insights and resources to help existing clients and source new ones.

The report, Putting Energy Efficiency to Work For Business, is co-authored with the Energy Efficiency Council and sets out the practical steps businesses can take to unlock the benefits of energy efficiency.

Brokers should also be aware of the raft of tax savings and government grants, such as the NSW Energy Savings Scheme (ESS) and Victorian Energy Upgrades (VEU) program.^[3] 

On all fronts, the energy efficiency opportunity is unlocking new lending opportunities and driving business growth for brokers.

Learn more

Funding for energy efficiency is a growing market trend that every broker needs to be across. For timely and practical insights that you can use with your clients, get the report, Putting Energy Efficiency to Work For Business,. To learn more about opportunities in commercial broking, contact ANZ.

This article is brought you by ANZ

This is general information. ANZ is not giving advice or recommendations, and we haven’t taken into account your clients’ needs, financial circumstances or objectives. You and your clients should carefully consider which ANZ products are appropriate for them and should seek appropriate independent advice (which may include property, legal, financial, taxation and accounting advice) before making any decisions, investing, or acting on it. Terms and conditions, fees and charges, and credit approval and eligibility criteria apply to ANZ products.