The government has been called on to offer discounted green loans to small and medium sized enterprises (SMEs) as they grapple with the net zero transition.
A group of fintech’s led by finance marketplace Funding Options and lender Swishfund has spearheaded the call, as SMEs fall behind in the race to net zero – with not enough capital to make it a priority.
The group proposed a £1bn ‘ESG Lending Pool’, which would be run by state-owned British Business Bank and is match-funded by private capital, for lenders to make loans to ESG-focussed business or for ESG-related purposes.
It follows a report by the British Business Bank that smaller businesses are responsible for around half of the UK’s business-produced emissions.
Despite climate commitments like net zero pledges becoming more prevalent among businesses as the government embarks on its ‘green revolution’, only around half of smaller firms have decarbonisation or cutting their environmental impact as a near-term priority.
More than a third of businesses (35 per cent) said that this is due to the costs associated with the net zero transition, with larger firms having access to a heftier pot of capital to dip into for the cause.
“SMEs, not necessarily through fault of their own, are moving too slowly in the Race to Zero because they are not financially incentivised to make climate change a priority,” Funding Options boss Simon Cureton said.
“Today, there is a very clear causal link between the economic productivity of our small business community and the nation’s carbon emissions. To stem and reverse that, these businesses require the requisite infrastructure and support to allow sustainability goals and commercial viability to co-exist – especially as they rebuild following the crippling effects of the pandemic.”
He added: “As a group we believe the green loans measures we are calling for will incentivise positive and long-term change for the benefit of the planet.”