Platform on Sustainable Finance report: Streamlining sustainable finance for SMEs

The Platform on Sustainable Finance, an advisory body to the European Commission, has published an independent report on streamlining sustainable finance for SMEs.

The report builds also on the experience with the implementation of the sustainability guarantee under the InvestEU programme (and its accompanying tools) and suggests developing a voluntary, streamlined approach – the “SME sustainable finance standard” – to help SMEs and their lenders or financiers voluntarily demonstrate SMEs’ environmental sustainability performance.

Small and medium‑sized enterprises (SMEs) are pivotal to Europe’s sustainability transition, contributing over 50% of the EU’s GDP and more than 63% of enterprise CO2 and broader GHG emissions. The transition to a net zero, resilient, and environmentally sustainable economy hinges on SMEs’ ability to access the necessary financing to decarbonise, build climate‑resilience, green their operations, and develop sustainable products and services. Despite their critical role, SMEs face significant challenges in securing external financing for sustainability efforts.

Most SMEs fund their sustainability projects internally, but when seeking external financing, they usually turn to bank loans. However, accessing sustainable finance can be challenging due to high loan minimums, complex regulations, and lack of awareness or capacity. The EU taxonomy, an increasingly important tool for accessing green finance in the EU, was not specifically designed for SMEs and does not apply to them, making it harder for them to access sustainable funding and disclose their climate‑related impacts.

To address these challenges, the Platform proposes the “SME sustainable finance standard”, a streamlined, voluntary framework for banks and other financial institutions to classify loans (or other types of financing) provided to SMEs as sustainable finance, while simplifying related voluntary disclosures.

The standard allows SMEs to disclose to their financiers their key performance indicators and demonstrate their climate‑related efforts, making it easier for financial institutions to assess and support them, including through an online tool that is suited to SMEs’ needs and capabilities.

The standard initially focuses on climate‑related sustainability and is planned to be expanded to other environmental objectives, bridging the gap between SMEs and sustainable finance.

The Platform on Sustainable Finance will present the report in a webinar on Thursday 27 March from 16:00 to 17:00 CET.