Modelling financing mechanisms using mini bonds for green and zero-waste projects
Journal
Journal of Small Business and Enterprise Development
Date Issued
January 7, 2025
Abstract
Purpose – To close the gap in scientific literature and practice of applying green finance instruments, such as
green mini-bonds, for financing environmentally beneficial projects with the practical application case of
municipal waste reduction.
Design/methodology/approach – It follows a case study and scenario analysis to investigate the financing
options for green and zero-waste projects. Data for the analysis has been collected from the financial reports of
waste management companies for the years 2016–2020, operating in the ten counties of Lithuania. Five
scenarios have been developed for the study – financing of large-scale projects with company funds, loan
financing, EU funds orsubsidies, municipal green bond issuance and mixed financing. The investment analysis
relies on the cost-benefit analysis principles recommended by the European Commission.
Findings – The research shows that the issuance of green mini-bonds can serve as an alternative to the funding
with the EU funds, delivering the same economic benefits and providing better financial performance. Analysis
also shows that the issuance of green mini-bonds is the most favourable financing option.
Research limitations/implications – Furtherresearch can be expanded with the analysis of other municipalities
in Lithuania to test the relevance of the accuracy of the conceptual model.
Practical implications – Results also show that small issuers, such as municipalities or waste management
companies, can create value and cover their financing needs. As a result, municipalities can consider the
issuance of mini-bonds to fund environmentally friendly projects.
Originality/value – The research provides alternatives to traditional financing ways such as bank loan
financing. A new economic model of scenarios for municipal waste management was developed, and its
effectiveness was evaluated.
green mini-bonds, for financing environmentally beneficial projects with the practical application case of
municipal waste reduction.
Design/methodology/approach – It follows a case study and scenario analysis to investigate the financing
options for green and zero-waste projects. Data for the analysis has been collected from the financial reports of
waste management companies for the years 2016–2020, operating in the ten counties of Lithuania. Five
scenarios have been developed for the study – financing of large-scale projects with company funds, loan
financing, EU funds orsubsidies, municipal green bond issuance and mixed financing. The investment analysis
relies on the cost-benefit analysis principles recommended by the European Commission.
Findings – The research shows that the issuance of green mini-bonds can serve as an alternative to the funding
with the EU funds, delivering the same economic benefits and providing better financial performance. Analysis
also shows that the issuance of green mini-bonds is the most favourable financing option.
Research limitations/implications – Furtherresearch can be expanded with the analysis of other municipalities
in Lithuania to test the relevance of the accuracy of the conceptual model.
Practical implications – Results also show that small issuers, such as municipalities or waste management
companies, can create value and cover their financing needs. As a result, municipalities can consider the
issuance of mini-bonds to fund environmentally friendly projects.
Originality/value – The research provides alternatives to traditional financing ways such as bank loan
financing. A new economic model of scenarios for municipal waste management was developed, and its
effectiveness was evaluated.