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Lack of Green Finance Products for SMEs Presents Opportunity for Banks and Lenders

The Lending Standards Board (LSB) is urging financial services firms to address the challenges faced by small and medium-sized enterprises (SMEs) in accessing sustainable financial products.

Insight from the self-regulatory body for banks and lenders reveals that while there is a growing demand for green finance among SMEs, many businesses still encounter barriers such as cost, complexity and a lack of information.

According to the LSB’s findings, only a limited number of registered firms offer specific green finance products to SMEs, with varying levels of customer uptake. Financial services firms commonly offer green loans that focus on efficiency improvements, including electric vehicle purchases and premises upgrades.

Emma Lovell, chief executive of the LSB, stressed the importance of raising awareness and providing support to SMEs: “As the drive to transition to net zero continues to intensify, firms should be considering, across all finance products, how they can help customers to achieve their green objectives, whilst balancing the effects of the wider landscape.”

The LSB report also highlights the need for the wider financial services sector to align with the growing focus on green and sustainable initiatives. While regulatory efforts have primarily focused on disclosure requirements for larger businesses and the labeling of investment products, there is an increasing need to consider how financial products and services can support green and sustainable goals.

“The wider financial services sector needs to consider how products and services are being used to support green or sustainable initiatives. In turn, this is leading both firms and SMEs to take additional steps to improve their understanding of their environmental impact and how the products they offer, or use, impact on the environment,” the report reads.

Greener finance consultation

The ongoing review of the Standards of Lending Practice for business customers by the Lending Standards Board will explore the inclusion of green finance for SMEs. The consultation seeks to address issues related to digital channels, support for businesses facing financial difficulties, and the expectations placed on firms. The consultation welcomes feedback until 10 August 2023.

It provides an opportunity for stakeholders to contribute their insights and feedback to shape the future of green finance for SMEs in the UK.

“For customers looking to borrow or use finance to make changes that are positive for the environment, firms should be understanding how their products – whether they are labelled as green or sustainable, or not – can support the SME’s objectives,” said Lovell.

Responses to the issues raised in the consultation should be directed to [email protected] or
[email protected].

Last week, the Treasury Committee launched a new inquiry into small business access to finance and small and medium-sized enterprise (SME) lending. The cross-party Committee of MPs will examine the key challenges SMEs face when seeking finance, the regulation of small business lending, and the role the Government can play in enhancing lending to small businesses.


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