UK sustainability grants for business

The prospect of climate change, a shift to renewable energy and a move towards plastic and waste-free living has opened up a world of opportunities for environmentally minded entrepreneurs.

With customers willing to pay more for sustainable products and services according to research by YouGov and legislation prompting businesses into more environmentally friendly activities, the next decade is likely to see a boom in green businesses that deliver sustainable products and services.

The green shoots of sustainable businesses are already evident. London’s green economy generates around £28bn in the capital, employing around 160,000 people and growing at around 6% each year.

A 2023 study by Deloitte found one in three consumers (30%) stopped purchasing certain brands or products because of ethical or sustainability-related concerns. 

Green grants for green shoots businesses

With the drive towards a carbon-neutral, net zero society gaining urgency due to climbing global temperatures, now may be a good time to launch a business geared to helping the planet while meeting customers’ needs.

Sustainable businesses generally operate in an environmentally friendly way, producing products and services that look to solve environmental issues and concerns, such as zero waste refill shops or environmentally friendly products.

Read about four sustainable start-ups to watch in 2021.

However, launching a business can require funding either through a loan, such as a Start Up Loan, or from investment from other sources.

While many small businesses rely on help from friends and family to get off the starting blocks, green grants and awards are available, subject to conditions, for start-ups with an environmental focus.

Green business grants for sustainable start-ups

As environmental concerns have grown, so too have the number and type of awards, loans, and grants to support sustainable businesses.

Incentives range from direct investment and awards from banks to government and local schemes such as the Rural Business Investment Programme.

We’ve set out below some of the green grants available to start-ups, but remember that that these are examples only and it’s important to investigate loans and grants fully from a wide range of lenders and financial bodies so you can compare options.

It’s important that you seek expert independent guidance to help determine whether any of the options mentioned in this article are suitable for your needs.

In most cases, you’ll need to prove that your start-up will have a positive environmental impact when applying for a grant or loan and securing finance is not guaranteed.

Local authorities and government

Local authorities may be good place to start, with many offering small grants to micro-enterprises – businesses with fewer than ten employees and a turnover of less than £1.7 million – looking to launch and have a positive impact on the environment.

If you’re planning on launching an innovative green product or service, you can also check if your business is eligible for Research and Development (R&D) tax relief.

Organisations such as Innovate UK are a potential source of funding, especially for collaborative innovation work on a product or service.

The Carbon Trust

SMEs looking to develop innovative environmental solutions can apply for Phase 3 of The Department for Business, Energy & Industrial Strategy (BEIS) Industrial Energy Efficiency Accelerator (IEEA), an £8 million programme that is open to UK businesses to support the commercial demonstration of innovative technologies that have the potential to cut carbon emissions through reduced energy consumption.

Industrial Energy Efficiency Accelerator (IEEA).

Clean Growth Fund

Created in partnership with BEIS and the CCLA, the Clean Growth Fund is aimed squarely at low carbon start-ups developing solutions that reduce greenhouse gas emissions and improve efficiency in energy, waste, transport and water use.

Eligible businesses can be at a pre-launch stage or have just started generating revenues, with £40 million of funding available.

Clean Growth Fund

Low Carbon Innovation Fund (LCIF)

Developed with the Department of Levelling Up, Housing and Communities and funded by the European Regional Development Fund, the LCIF is investing in businesses in the East of England that aim to make a measurable contribution to reducing greenhouse gases.

The current fund is looking to invest £11 million, including in start-ups that are just launching, and the initiative is worth over £100 million in total.

Low carbon innovation fund

Green Port Hull

Available to small and medium-sized companies located in all areas of Hull and the East Riding of Yorkshire, grants starting at £10,000 are available to, amongst others, launch a new business or upgrade existing businesses with innovative new technologies.

The grant is designed to support the development of businesses in renewable energy, green technologies, engineering and low carbon sectors.

Green Port Business Investment Grant.

Coventry and Warwickshire Green Business Programme

Several grants are available for businesses with fewer than 250 employees based in Coventry and Warwickshire who want to save money on energy, waste and water bills and maximise low carbon opportunities.

The Low Carbon Innovation Grant is designed to support companies developing low-carbon products or technologies.

The grant award is between £1,500 to £50,000 and is designed to cover 40% of improvement costs.

A Low Carbon Revenue Grant aims to support companies looking to commercialise low-carbon products that are new to the market or new to the company with a maximum £6,000 award.

Low Carbon Grants

LoCASE

Low Carbon Across the South East (LoCASE) funds small businesses in the South and East of England looking at green projects, with grants ranging from £1,000 to £10,000.

Grants have been awarded to 1,278 small businesses so far.

Business development grants are available for businesses offering low-carbon goods and services, which can be used for costs such as equipment, IT and certification.

LoCASE

Green loans for start-ups

While green grants for new businesses tailored to launching sustainable products and services are available, there are also green loans from commercial lenders that are tailored to supporting sustainable start-ups.

Many high street banks offer loans to support investment in sustainable businesses, and we’ve rounded up two examples.

It may be worth investigating a range of lenders who may offer grants and loans for green development.

Please note that loans, including those set out below, are subject to status and eligibility and that terms and conditions apply.

There is no guarantee that your business will be approved for finance and loans may not be suitable for all businesses.

It is important that you seek expert independent guidance to help determine whether a loan is suitable for your needs.

Barclays Green Loan

Loans are available for small businesses looking to finance sustainable and green energy projects, with up to £5million of investment available for businesses with fewer than 250 employees.

Term length is between one and 20 years and aims to fund green and sustainable projects.

Barclays

HSBC Green Finance Initiative

HSBC’s Green Term Loans are part of its Green Finance Initiative, with minimum loans from £300,000.

A Green Asset Finance scheme is also available, which helps finance green assets through hire purchase or leasing.

HSBC