Environmental Summit COP26
Europe Event Analysis Fintech Fintech for Good Lending

Imposing ESG and Meeting Net Zero Is Too Expensive for UK SMEs; COP26 Lobby Group Claims

With small businesses being responsible for around half of the carbon emissions generated from business and industry, a group of financial services providers and influential small business organisations have come together to sign an open letter calling for a tangible solution to hit climate goals by 2050.

With the Environmental Summit COP26 due to begin in Glasgow on the 31st of October, a group of financial services providers and small business leaders are lobbying the government to adopt proposals designed to reduce the carbon footprint of UK SMEs and make the nation a world leader in green finance.

British Business Bank estimates that small companies are responsible for around half of the UK’s industrial emissions, yet just 20% of small businesses have committed to a Net Zero target, according to a survey undertaken by the national standards body British Standards Institution. The relative lack of commitment from SMEs is in stark contrast to the 50% of larger businesses that’ve committed to the same scheme.

Concern over additional and unnecessary cost is cited as the primary reason for the lack of activity. In the government’s 48-page ‘Greening Finance: A Roadmap to Sustainable Investing‘ report, the Chancellor Rishi Sunak stated that “greening the financial system is an integral part of my plans for the future of the UK’s financial services” but to-date financial products that marry both commercial competitiveness and ESG-related benefits have not been offered to SMEs. Not addressing this could derail the government’s 2050 Net Zero target.

The group is calling on the government to act now by providing the right incentives to enable targets to be hit. It proposes two key measures:

  1. A government-backed guarantee (50% of losses), in respect of eligible commercial ESG-related lending to small businesses, administered through British Business Bank in a similar manner to BBLs and CBILS;and/or
  2. A £1 billion ESG Lending Pool of capital to be run by state-owned British Business Bank, that is match-funded by institutional private capital, for lenders to originate loans to ESG-oriented business and/or for ESG-related purposes.

Led by business Finance marketplace Funding Options and alternative lender Swishfund, the open letter has been co-signed by some of the biggest names in fintech and the small business community, including Enterprise Nation, Capitalise, Fintech North, Inchorus, as well as Greenr, an organisation that enables businesses to baseline emissions, support offset projects and engage their employees to reduce emissions at source through their gamified mobile app and web dashboard, and Carbon Footprint Ltd., which for almost 20 years has guided private companies of all sizes and public sector organisations on tracking and reducing their environmental impact.

The open letter calls for HM Treasury to open discussions with a view to announcing measures in the 2022 UK Budget, if not sooner.

The problem, it states, is that “for many small businesses, environmental responsibility is seen as an additional and unnecessary cost, and lenders with a strong ESG brand are considered expensive and/or unsuitable for small business lending”.

The group argues that issuing government-backed guarantees on ESG loans to visibly cover losses, via the infrastructure used to deliver the Coronavirus Business Interruption Loan and Bounce Back Loan schemes (CBILS and BBLS), will bring the positive benefits of green-bonds, social-bonds and sustainability-linked bonds into the small business environment.

“We will only achieve cultural change in the small business community when ESG and commercial competitiveness become happy bedfellows,” the open letter states.

Simon Cureton, Chief Executive Officer, Funding Options
Simon Cureton, Chief Executive Officer, Funding Options

Simon Cureton, Chief Executive Officer at Funding Options, comments: “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. We’re at a critical juncture, from which decisive and affirmative action is required urgently to collectively open the path to Net Zero. 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. 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.”

Andrew Jackson, Managing Director, Swishfund
Andrew Jackson, Managing Director, Swishfund

Andrew Jackson, Managing Director at Swishfund, added: “The prevention of climate change means battling the human condition that prioritises short-term profits over long-term losses. Ambitious businesses that grow in strong and sustainable ways prioritise long-term gains over short-term costs. This commonality of long-term investment is why good business is fundamentally aligned with reducing climate change. Since people usually only pay attention to what is in front of them, it is incumbent on the financial services industry to promote commercially attractive products to small businesses, which also deliver ESG-related benefits. Unfortunately, small business lending in the UK is not yet mature enough, which is why we need the UK Government to kickstart SME green loans, and pioneer a world-leading business culture change. Without competitively priced financial products that actively promote climate-friendly solutions and processes, we will fail to bridge the gap between the good intent of SMEs and the action required to make a difference.”


  • Tyler is a fintech journalist with specific interests in online banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

Related posts

Creditsafe: Using Fintech Solutions to Mitigate Risks and Promote CSR

The Fintech Times

UK Fintech News Roundup: The Latest Stories 22/02

Tom Bleach

Cayman Islands, Brazil and Chile are the First Recepiants of Hashdex’s New Staking Program

Francis Bignell