Laura WilesLSB has published a report highlighting challenges in the SME green finance market and exploring how banks and lenders can support their customers to become more sustainable.
The report concludes that while demand for green finance products is growing, many smaller business still face barriers accessing sustainable financial products. LSB identified around 15 green finance products currently being offered to SMEs by registered firms. The number of customers accessing those products ranged from 0 to 500. Green loans were the most common product, most of which were aimed at SMEs looking to make efficiency improvements to their premises or travel arrangements, for example by purchasing electric vehicles.
Separate research from the British Business Bank found that 47% of SMEs are open to reducing their environmental impact and 22% are prepared to use finance to invest in changes, but many are put off by factors like cost, capacity and uncertainty over the lack of information on the green finance options available.
The LSB report also noted that most recent regulatory changes have been focused on disclosure requirements for large businesses and the labelling of investment products. However, LSB concludes that the direction of travel is clear, and the wider financial services sector must consider how products and services are being used to support green or sustainable initiatives.
LSB is currently conducting a review of the Standards of Lending Practice for business customers which will, amongst other things, examine the issue of green finance for SMEs. The consultation closes on 10 August 2023.