ICC, in collaboration with Sage, has launched a global report which reveals a $789 billion green finance opportunity for small businesses. The report exposes a gap between SMEs’ sustainability ambition and their ability to take action, preventing them from accessing vital green finance needed to drive their initiatives. To address these obstacles, the report concludes with recommendations to enhance sustainability reporting and improve access to sustainable finance.
Key findings
An estimated $30.3 trillion is currently invested in sustainable assets globally, with $789 billion specifically identified as the green finance opportunity for SMEs.
While 73% of public and private financial institutions now offer green finance to SMEs, only 2.8% of SMEs have applied for it in the past three years.
SMEs with access to sustainable finance are 2.5 times more likely to implement significant sustainability initiatives.
Sage and ICC launched the report at the United Nations global climate summit COP29, urging global decision-makers to bridge the gap between SMEs’ growing sustainability ambitions and their ability to act.
The report highlights that while 86% of SMEs say that sustainability is important to their business, only 9.1% formally report on their impact, citing complex reporting requirements as a major roadblock (74%).
The data revealed a “virtuous circle” between sustainability reporting, sustainable finance and climate action. SMEs that report on their impact are more likely to secure funding to become more sustainable, which in turn, helps them take further steps towards net-zero.
Enhanced reporting would also help financial institutions who say data challenges are a huge barrier to offering green loans (84%). Currently, however, only 1.2% of SMEs are leveraging this virtuous circle to grow sustainably.
How to unlock the green finance opportunity for SMEs
To fully unlock the potential of SMEs in combating climate change, we call on governments, financial institutions and technology partners to:
Simplify sustainability reporting
Implement proportionate and
streamlined reporting standards tailored to SMEs, making it easier for them to access green finance.
Expand access to digital tools
Equip SMEs with affordable, automated tools to track emissions and streamline reporting.
Increase financial incentives
Offer tax credits, grants,
and favourable loan terms to motivate SMEs to measure their environmental impacts and invest in sustainable practices.
The report also found:
- Interest in and engagement with climate change is fast rising. 86% of SMEs state that sustainability is crucial to their business, up from 83% last year, and 72% believe they can contribute to tackling climate change. However, only 63% are currently taking steps to reduce their environmental impact.
- Action is growing but at a much slower pace. 68% of SMEs say the cost of implementing sustainability initiatives is too high, and 67% cite time constraints. These barriers are growing rather than decreasing, slowing down climate action.
- Finance is key to unlocking more action. 89% of SMEs that secured green finance say it was crucial to their sustainability efforts, but only 19% have considered external financing for environmental initiatives.
- SMEs are looking to technology to help bridge the gap between intention and action. 73% of SMEs are concerned about the upfront costs of sustainability reporting, and 66% are worried about its complexity. However, 65% believe digital tools could help simplify the process and unlock the benefits of green finance.
Why are SMEs central to the global transition to a net-zero emissions economy?
SMEs are essential to economies and societies worldwide, particularly in emerging and developing economies. They represent over 90% of businesses and account for more than 50% of global non-household greenhouse gas emissions. Consequently, MSMEs are the cornerstone of any economy-wide transition to net zero.
They can drive the innovation needed to meet the climate challenge and have the potential to make a positive contribution to climate action — both by reducing their own emissions and those in their supply chains.
However, most SMEs struggle with limited resources and complex requirements associated with adopting sustainable practices.
How is ICC supporting SME climate action?
Over the past four years, ICC has partnered with Sage to explore the role of MSMEs and the support they need to minimise their climate impact and contribute to societal goals. This collaboration has produced several reports, with our latest report building upon three years of research on SMEs and climate action.
