LocationsA New Opportunity for Serbia’s Economy
Banks Are Now Investing in Green Projects
January 20, 2026
Photo: UNDP Serbia
Thanks to a new joint green financing model, developed by United Nations Development Programme (UNDP) in cooperation with the Ministry of Environmental Protection and the European Investment Bank (EIB) under the EU for Green Agenda in Serbia initiative, private and public enterprises can now receive both donor grants and favourable commercial bank loans for green investments. This financing model reduces risks for banks, broadens the range of investments that can be supported, and paves the way for more modern, efficient and competitive production – a key requirement for maintaining competitiveness in the European Union market.
Žarko Petrović, Programme Analyst on Resilient Development at UNDP Serbia, explains how this mechanism works in practice and what it contributes to the economy.
Who is this new financing model intended for?
Introducing commercial banks as new partners in green financing is a fundamental innovation of this model. It is designed for investments in green technologies that have previously been less attractive to commercial banks, such as heating and cooling systems, the construction of wastewater and solid waste treatment facilities, and the modernisation of production processes. Small and medium-sized enterprises benefit most, as they now have access to bank financing for these types of investments for the first time. This also enables companies to comply with domestic and EU regulations on reducing greenhouse gas emissions and protecting the environment, including Integrated Pollution Prevention and Control (IPPC), the EU Carbon Border Adjustment Mechanism (CBAM), and Best Available Techniques (BAT). As a result, greener business operations are becoming a reality for an increasing number of companies in Serbia.
What do companies and banks gain from participating in this Public Call?
Investment risk is shared among donors, the state, companies and banks, which significantly facilitates decision-making regarding the financing of green innovations. Companies selected through UNDP’s Public Call for co-financing, within the EU for Green Agenda in Serbia initiative, also receive mentoring support to develop high-quality, technically mature project proposals. The most feasible projects receive grant funding from the Government of Switzerland, as well as access to more favourable bank loans with adjusted conditions such as lower interest rates and longer repayment periods. Banks that responded to the Public Call gain the opportunity to more easily identify sustainable initiatives and invest in safer, better-structured green projects, thereby developing new green financial products and expanding their client base. Participating financial institutions in this model currently include: OTP Bank, Banca Intesa, ProCredit Bank, Erste Bank, NLB Komercijalna banka, UniCredit Bank, UniCredit Leasing, and ALTA Leasing.
What happens to this support after the project ends, and how is its sustainability ensured?
The goal of introducing this model is the long-term establishment of a green financing market in Serbia. Within the EU for Green Agenda in Serbia initiative, the capacities of banks, institutions and the private sector are being strengthened to assess and finance green investments, so that when donor funds are no longer available, financing can continue through standard market mechanisms. This ensures the model remains sustainable after the project ends. UNDP and its partners are developing and establishing national instruments for green financing, promoting innovation and expanding the support network to ensure the continuity and growth of green investments in Serbia.
What are the biggest challenges to financing the green transition, and how can they be overcome?
The biggest challenge to financing the green transition in Serbia is the lack of accessible and sustainable domestic financial instruments, particularly for small and medium-sized enterprises. Serbia currently has neither a national green fund nor a development bank specialising in green projects, which significantly limits both the scale and pace of investments.
As a result, there are no sufficiently developed incentive schemes or green financing mechanisms to facilitate investments, especially for SMEs. Additional challenges include high interest rates, complex administrative procedures and decreasing availability of grants, making many projects financially unviable.
The solution lies in establishing a national green financing mechanism and applying blended finance models, which combine loans, grants and guarantees. This model is already proving successful within the EU for Green Agenda in Serbia initiative, as it enables financial sustainability even for investment projects with longer payback periods, such as wastewater treatment facilities or circular economy innovations.
Equally important is strengthening the regulatory framework to ensure it is stable and predictable, developing a long-term strategy aligned with European standards, and supporting innovation and research. In addition to financing, a major challenge is insufficient knowledge about green technologies and available instruments, particularly among SMEs.
Therefore, education, advisory support and mentoring are essential for companies to develop high-quality projects and access financing more easily. The core objective is to build a sustainable domestic market for green investments through cooperation between the state, banks, the private sector and international partners.
This article was developed within the EU for Green Agenda in Serbia project. This project, with the technical and financial support of the European Union, is implemented by UNDP in partnership with the Ministry of Environmental Protection, and in cooperation with Sweden and the European Investment Bank (EIB), with additional funding provided by the governments of Sweden, Switzerland and Serbia.
