The most recent BMO Climate Institute Business Leaders Survey found that more respondents are citing expectations from customers and investors as reasons to engage in green or sustainable action. This indicates that some stakeholders now expect businesses to make greener decisions – but companies must still consider the financial return on these decisions.
Green equipment represents an opportunity for businesses of all sizes of sectors to explore sustainability-oriented investments that can also provide financial benefits. Technologies such as solar panels, heat pumps, electric vehicles, and building automation systems are not new. But in recent years, we have seen significant advancements in many technologies traditionally labeled as “sustainable”, “green”, or “energy efficient”. As these technologies have matured, many have scaled and achieved significant upfront cost reductions as a result.
In an increasingly complex economic environment, companies are considering the bottom-line benefits of investment in green or energy efficient equipment. Indeed, in a recent Sustainability Leaders podcast, Torsten Lichtenau, Global Head of Carbon Transition Practice at Bain & Co., noted: “I think we're beyond the time where we're just setting targets around carbon and decarbonization. People are now more thinking about, ‘How do I realize this target that is still valid? How do I deliver, but also how do I monetize all my efforts?’”
The BMO Climate Institute looked at what is driving this trend, how green equipment can benefit businesses, and how different sectors are leveraging this equipment to drive resilience and profit.
What is green equipment?
Green and energy efficient equipment can be generally defined as equipment that is significantly more energy efficient relative to standard equipment, or which otherwise contributes to sustainable business practices. Green equipment exists across a wide range of functions and industries.
Some examples include:
Clean energy generation and storage equipment (solar panels, batteries, infrastructure, etc.)
Commercial heat pumps
Gas turbine upgrades
Electric equipment or vehicles (snowplows, school buses, etc.)
Electric substations
LED greenhouse lighting
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Benefits of green and efficient equipment
It is important to note that green equipment – while labeled “green” because of its potential to reduce resource usage or contribute to sustainable practices – has significant benefits beyond sustainability. Key benefits include:
Financial benefits: Energy efficient or green equipment can enhance cash flow and operational resiliency, often through reduced operating costs. These types of equipment often result in more efficient use of resources, decreased energy consumption, increased automation of processes, and other benefits to the bottom line.
Many types of green equipment have seen significant reduction in upfront cost as technology has improved and scaled. As a result, businesses across diverse sectors - including agriculture, real estate, construction, healthcare, transportation, and more - may have the opportunity to improve financial performance by investing in green equipment.
For example, commercial solar systems may experience payback periods far shorter than the lifespan of the equipment. This means that businesses may benefit from reduced or eliminated electricity costs for years past the break-even point when they recoup their initial investment.
Operational resilience: Beyond strictly financial benefits, investment in green and efficient equipment can strengthen a business’ resilience to certain types of volatility. For example, the use of solar energy combined with battery storage may allow some business operations to continue in the event of a power outage. Similarly, the use of on-site renewable energy generation may reduce exposure to volatile energy prices. Additionally, renewable generation and storage equipment can reduce exposure to fluctuating electricity prices, creating more certainty in financial planning and allowing businesses to make more confident decisions about future investments.
Government incentives: The Canadian and U.S. governments have implemented tax incentives that may make green equipment investments more financially attractive relative to alternatives.
Tax incentives currently available for green equipment in Canada include a 30% refundable tax credit for investments in eligible property as well as tax benefits allowing for deductions and accelerated write-offs for clean energy generation and conservation equipment.
Tax incentives currently available for green equipment in the U.S. include investment tax credits for clean energy production and investment. The introduction of the ITC in the United States can allow companies to take advantage of flexible financing structures, including tax lease and sale-leaseback financing.
Sustainability goals: Many companies have set sustainability targets to reduce their greenhouse gas emissions or enhance overall corporate sustainability. These targets often apply not only to the companies themselves, but to firms along their supply chain and the real estate that they occupy. Purchasing green equipment may help companies to meet their own sustainability goals or demonstrate value to supply chain partners.
General trends
Energy efficient and green equipment innovation has seen uptake across a wide range of sectors and technologies in recent years. This trend has been driven in part by technologies experiencing rapid advancement and scale, leading to increasing technological benefits alongside a decline in cost for many types of efficient equipment.
Industry-Specific Trends
Agriculture
Many farmers are exploring resource efficient options, like low-emission machinery or increased efficiency irrigation systems.
Farmland provides a natural opportunity for energy generation equipment requiring significant space, like solar panels. This equipment can be used to power farm equipment, like irrigation systems, and can lead to decreased operational costs and increased energy resilience.
Equipment associated with practices that minimize environmental impact, such as no-till farming, can result in increased crop yields due to improved soil health.
Commercial Real Estate
Green and energy efficient equipment can reduce operational costs for building owners and may lead to increased rent premiums.
One third of respondents surveyed by BMO’s 2025 Business Leaders Survey say their companies have a building or assets retrofit strategy in place.
Equipment like heat pumps, solar panels, and diesel-alternative generators are particularly attractive to building owners seeking to manage costs and reduce emissions associated with their real estate footprint.
Given the long lifecycle of commercial real estate assets, investment into lower-emission, efficient equipment can “future proof” assets that may be subject to future regulatory pressure, consumer preference, and investor expectations around decarbonization of the built environment.
Construction
Similar to commercial real estate, construction companies are increasingly investing in energy-efficient machinery and equipment in response to increased attention on the decarbonization of the built environment.
Autonomous construction equipment driven by advanced sensor technology has the potential to optimize processes, significant decreasing fuel consumption and material waste.
This trend is supported by government incentives, a shifting focus toward embodied carbon in the construction of buildings and changing building codes.
Healthcare
The healthcare industry has also seen as shift toward sustainability, with increased interest in energy-efficient medical equipment and decarbonization of healthcare facilities.
Manufacturing
Manufacturers can drive increased operational efficiency and energy savings by investing in green equipment.
Supply chain partners may exert pressure to reduce emissions associated with manufacturing operations.
Transportation
Drivers in some parts of North America are shifting toward electric and hybrid vehicles, driven in part by advancement in electric vehicle (EV) technology and ongoing development of EV infrastructure.
Transportation companies are increasingly financing electric trucks, buses, and other types of vehicles.
Conclusion
While the landscape for green and efficient technologies is still evolving, the benefit of investment in green equipment is clear across a range of sectors and technologies. Green equipment may provide an avenue toward operational resilience, financial benefits, and progress toward sustainability goals.
Businesses interested in green equipment should consider the following:
Quantify initial cost and potential savings: While green and efficient equipment can require a higher upfront cost, decision makers should consider the longer-term return on investment can be significant. Businesses should quantify costs associated with business-as-usual that might be reduced or eliminated by investment in green equipment.
Consider all the risks: Because green assets are often newer technology, companies should consider the implications of limited data on asset collateral or resale values in the market.
Explore financing options: Government incentives and tax credits may reduce the cost associated with investment in green or clean energy equipment. Additionally, businesses should consider different financing structures suited to the long lifespan of these assets, including sale-leaseback financing and tax lease structures in the U.S.
Consider consumer and investor preference: Companies should consider how concrete investments in green equipment can demonstrate value to key stakeholders.
(Wendy Carroll, Head, Equipment Finance and Leasing, BMO and Sonal Dandavate, Director, Equipment Finance, Ontario, BMO also contributed to this article.)