John ConnorEU advisory body the Platform on Sustainable Finance has proposed a streamlined, voluntary framework for financial institutions to classify loans or other types of financing provided to SMEs as sustainable finance. It says the standard will help SMEs and their financiers to show the SMEs’ environmental sustainability performance. SMEs are critical to the transition to net zero, but often struggle to get the right financing to decarbonise and otherwise “green” their operations. When the businesses need to seek external funding, issues such as loan minimums, regulation and a lack of understanding can hamper availability. The EU taxonomy was not designed for SMEs and doesn’t apply to them, which only adds to the challenge.
The standard proposed would allow SMEs to disclose their KPIs to their financiers and show their climate-related efforts, which should help potential lenders assess and support them.