Funding Options calls for government discounted green loans to help SMEs reach net zero


With the opening of the COP26 environmental summit in Glasgow on October 31, a group of financial service providers and small business leaders are pressing the government to adopt proposals to reduce the carbon footprint of UK SMEs and to make the country a world leader in green finance.

The British Business Bank estimates that small businesses are responsible for around half of UK industrial emissions, but only 20% of small businesses have committed to a Net Zero target, according to a survey by the British Standards Institution. This contrasts with 50% of large companies.

Concerns about additional and unnecessary costs are cited as the main reason for the lack of activity. In the government document Greening Finance: A Roadmap to Sustainable Investing, Chancellor Rishi Sunak said that “greening the financial system is an integral part of my plans for the future of UK financial services”, but to To date, financial products that combine both business competitiveness and ESG benefits have not been offered to SMEs. Failure to address this could derail the government’s net zero goal in 2050.

The group calls on the government to act now by providing the right incentives to achieve the goals. It offers two key measures:
a. A government backed guarantee (50% of losses), on ESG qualifying commercial loans to small businesses, administered by the British Business Bank in the same way as BBL and CBILS; and or
b. A £ 1bn ESG loan pool to be managed by the state-owned British Business Bank, which is co-financed by private institutional capital, enabling lenders to make loans to ESG-oriented companies and / or for ESG purposes.

Led by corporate finance marketplace Funding Options and alternative lender Swishfund, the open letter was 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 organization that enables companies to benchmark 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 organizations on monitoring and reducing their environmental impact. The open letter calls on the UK Treasury to open talks to announce measures in the 2022 UK budget, if not sooner.

The problem, he says, is that “for many small businesses, environmental responsibility is seen as an additional and unnecessary cost, and lenders with a strong ESG brand are seen as expensive and / or unsuitable for short term loans companies ”.

The group argues that issuing government-backed guarantees on ESG loans to visibly cover losses, through the infrastructure used to deliver the business interruption and rebound lending programs (CBILS and BBLS), will bring the positive benefits of green bonds, social bonds and sustainability bonds in the small business environment.

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

Simon Cureton, CEO of Funding Options, comments: “SMEs, not necessarily their fault, are moving too slowly in the race to zero because they have no financial incentive to make climate change a priority. We are at a critical juncture when decisive and positive action is urgently needed to collectively pave the way to Net Zero. Today, there is a very clear causal link between the economic productivity of our small business community and the country’s carbon emissions. To stem and reverse this, these businesses need the infrastructure and support to allow sustainability goals and commercial viability to coexist, especially as they rebuild themselves from the crippling effects of the pandemic. As a group, we believe that the green lending measures we are calling for will spur positive, long-term change for the benefit of the planet. ”

Andrew Jackson, Managing Director of Swishfund, comments: “Preventing climate change means fighting the human condition that prioritizes short-term profits over long-term losses. Ambitious companies that grow strong and sustainably prioritize long-term gains over short-term costs. This long-term investment community is why good business is fundamentally aligned with reducing climate change. Since people typically only pay attention to what’s in front of them, it behooves the financial services industry to promote commercially attractive products to small businesses, which also offer ESG benefits. Unfortunately, UK small business lending is not yet mature enough, which is why we need the UK government to launch green lending to SMEs and pioneer a premier corporate culture change. plan. Without competitively priced financial products that actively promote climate-friendly solutions and processes, we will fail to bridge the gap between the good intentions of SMEs and the action required to make a difference.


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