SMEs Face Barriers Accessing Green Finance
Many smaller businesses still face barriers when trying to access green finance products, a new report has found. Research from the Lending Standards Board (LSB), the self-regulatory body for banks and lenders, found that demand for and interest in sustainable finance is growing.
However, smaller firms looking to improve their environmental impact are facing barriers to accessing these products due to macroeconomic challenges and a lack of information about the green finance options available.
The LSB identified around 15 products currently being offered to small businesses specifically for green purposes, although take-up is low. Green loans were the most common product offered, most of which were aimed at small- and medium-sized enterprises (SMEs) looking to make efficiency improvements to their premises or travel arrangements, such as electric vehicle purchases.
Separate research from the British Business Bank (BBB) found that around half of SMEs are open to improving their environmental impact, and 22 per cent are prepared to use finance to invest in changes. However, the respondents claimed that factors like cost, capacity, and uncertainty over the paucity of information on the available green finance options turned them off.
The LSB also noted that SMEs have had to cope with negative economic events over the past two years, meaning that they have focused on staying afloat rather than sustainability.
“As the drive to transition to net zero continues to intensify, firms should be considering, across all financial products, how they can help customers achieve their green objectives while balancing the effects of the wider landscape,” said Emma Lovell, chief executive of the LSB.
“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.”
The LSB has launched a consultation on lending standards for business customers, which puts the issue of green finance for SMEs under consideration.
The LSB is welcoming responses to the issues raised in the consultation and any related feedback by August 10, 2023.
Source: P2P Finance News