UNDP and Business Development Fund introduce ESCO-Fund to support sustainable development and energy efficiency

June 5, 2024
Photo: Oleksiy Tishevskyi / UNDP in Ukraine

Kyiv, 5 June 2024 – The United Nations Development Program (UNDP), in cooperation with the Business Development Fund (BDF), has introduced a financial support mechanism to facilitate access for Energy Service Companies (ESCOs) to bank financing. 

The new mechanism was announced during the "ESCO Fund: Energy Efficiency for Sustainable Development" event, which took place on 5 June 2024 in Kyiv. The event brought together representatives of the state, municipalities, utility companies, ESCOs and banks, highlighting the importance of effective energy efficiency financing mechanisms for sustainable development and the country’s energy security.

Energy servicing encompasses a range of services aimed at increasing energy efficiency and reducing energy consumption. ESCOs provide these services, which include auditing, designing, financing, and implementing energy efficiency measures, as well as energy management.

To date, 639 ESCO contracts have been concluded in Ukraine totalling over U.S. $48.6 million. To ensure the energy security of the critical infrastructure of communities, the UNDP and its partners continue to support communities in implementing new energy service models, particularly for the modernization of street lighting, water utility pumping stations, and heat supply enterprises.

The new "ESCO Fund" mechanism from the UNDP and the BDF accelerates the development of the ESCO market in Ukraine by using banking instruments such as partial compensation of interest rates and loan principals, and providing additional guarantees. The fund is expected to support 10 to 15 pilot projects in communities.

Roman Shakhmatenko, Team Leader of the Energy and Environmental Portfolio at UNDP said: "We need to understand that the energy crisis is with us for a long time. And getting out of it will be a complex task, in which everyone will have to participate, including citizens, businesses, the state, public organizations, international partners, donors and, in particular, the private sector.”

"Energy efficiency in the country is no longer a trend of the distant future or a task of decarbonization. It’s an urgent necessity, and one of the most important priority tasks. This energy service mechanism is currently one of the key solutions that will give us a chance to rebuild and restore the energy system, while ensuring compliance with the ‘build back greener’ principle.”

Andriy Hapon, Chairman of the Board of the Entrepreneurship Development Fund said: "In these extremely difficult times for Ukraine, ESCO programs are definitely a priority for every Ukrainian, so the pilot project with UNDP provides a powerful impetus for the further development for the heat insulation not only of public spaces, but also of residential ones."

During the event, representatives from domestic banks shared their experiences in lending to ESCOs, and also discussed the existing barriers and challenges to increasing lending volumes.

ESCOs presented practical cases of implemented and future projects, demonstrating the benefits of the energy service model for various types of facilities, including buildings and water and heat supply systems.

The event, organized with the support of the GEF/UNDP project “Removing Barriers to Increase Investment in Energy Efficiency in Public Buildings in Ukraine through the ESCO Modality in Small and Medium Sized Cities,” served as an important platform for exchanging experiences, presenting new financial mechanisms and practical cases, and contributing to the development of energy efficiency in Ukraine.

Media enquiries: 

Yuliia Samus, UNDP Ukraine Head of Communications; e-mail: yuliia.samus@undp.org