Unlocking sustainable finance for SMEs

ICC, 2024 and Sage

Foreword by John Denton AO
Secretary General of the International Chamber of Commerce

The International Chamber of Commerce (ICC) is proud to continue its longstanding partnership with Sage, a collaboration that has consistently brought the voice of SMEs to the forefront of official climate negotiations. This work is essential in shaping a sustainable future for businesses worldwide.

SMEs are the backbone of the global economy, accounting for 90% of businesses and contributing significantly to employment and economic growth. However, these vital enterprises often face unique challenges in accessing the resources, knowledge, and financing needed to effectively measure, manage, and report on their sustainability performance.

ICC continues to take bold action to ensure that SMEs worldwide have the support and assistance needed to succeed in today’s rapidly changing global economy. We offer a range of tools and services to SMEs hosted on the ICC One Click platform – a resource that we are committed to expanding to address some of the challenges set out in this report.

ICC warmly welcomes this report’s timely and actionable insights into the barriers SMEs face in taking climate action and the potential solutions to overcome these obstacles. which aligns squarely with our strategic aim to unlock the full power of the private sector to accelerate the transition to a net-zero economy. The concept of the “virtuous circle,” connecting sustainability reporting, sustainable finance, and enhanced climate action, offers a powerful framework for understanding and addressing the needs of SMEs in the transition to a low-carbon and climate-resilient economy.

We strongly support the report’s call for simplified, standardised sustainability reporting frameworks tailored to the needs and capacities of SMEs. Equally important is the development of accessible, affordable digital tools to streamline the reporting process. These measures are crucial in enabling SMEs to participate fully in the global sustainability movement.

Improving SMEs’ access to sustainable finance is crucial for enabling their transition to more sustainable practices. The ICC recognises the pivotal role of financial institutions in this process and is committed to drive the development of innovative financial solutions tailored to SMEs’ unique needs, as part of our broader work on sustainable trade and sustainable trade finance.

ICC is committed to working with its global network to advocate for the effective implementation of the recommendations outlined in this report. Our goal is to create an enabling environment for SMEs to fully contribute to the achievement of the Paris Agreement goals and the Sustainable Development Goals.

By unlocking the potential of SMEs to take ambitious climate action, we can accelerate the transition to a more sustainable, resilient, and inclusive global economy. This report provides a roadmap for that journey, and ICC is proud to support its vision and recommendations.

Section 1.
Executive summary

Small and Medium-sized Enterprises (SMEs) are at the heart of our economies and societies and play a crucial role in achieving global climate goals. They represent over 90% of businesses and 50% of greenhouse gas emissions globally.²

Our research shows a growing paradox: while more SMEs recognise the importance of climate action, the barriers to taking effective action are also increasing. This widening gap demands urgent attention.

Our data shows strong growth year-on-year in engagement with sustainability issues

Yet, more SMEs report that the two biggest challenges to taking actions – cost and complexity – have risen

The challenge: the need to take climate action is intensifying, with more SMEs reporting that they have been directly impacted by climate change. 70% report experiencing direct effects on their business in the past year. These impacts include supply chain disruptions (39%), damage to assets or property (25%), and loss of productivity (24%).

The ‘Green Growth’ opportunity for SMEs to take climate action is also substantial and rapidly growing

Globally, $30.3 trillion trillion is invested in sustainable investing assets, representing a massive pool of capital available for climate initiatives.³ In non-US markets, it is growing especially fast, having increased by 20% since 2020. Importantly, much of this total is becoming accessible to SMEs, opening up new avenues for funding their sustainability efforts through green loans, sustainability-linked loans, green bonds, and specialised credit lines for energy-efficient equipment or renewable energy projects.³ 

A landmark OECD study Financing SMEs for Sustainability (2023)⁴ reveals that 73% of public and private financial institutions now offer green or sustainable finance options specifically tailored for SMEs. Our previous research⁵ has estimated the green finance opportunity for SMEs at $789 billion, representing a substantial incentive for climate action. Furthermore, many of these products come with preferential terms, such as lower interest rates or more flexible repayment options, making them particularly attractive for SMEs looking to invest in sustainability.

Environmental, Social, and Governance (ESG) and climate factors are pivotal in how banks and financial institutions make their lending and investment decisions. Over 60% consider climate implications when developing strategies and business plans, and nearly half set climate-related criteria for their suppliers. Over 75% of public and 60% of private institutions also assess the climate-related impacts of some or all of their financing/investment decisions.¹² 

Woolcool  Driving growth through sustainability
Woolcool, a pioneering Staffordshire-based company employing 67 people in total, is revolutionising the insulated packaging industry with its eco-friendly wool solutions. Under the leadership of Managing Director Josie Morris, who was awarded an MBE for her contributions to manufacturing and the environment, Woolcool has placed sustainability at the heart of its business model, driving impressive growth and garnering prestigious accolades such as B Corp certification and The Queen’s Award for Enterprise in Sustainable Development.

Woolcool’s commitment to environmental stewardship has been a catalyst for its success, attracting environmentally conscious customers and propelling the company to the forefront of the packaging market. However, as Woolcool seeks to further expand its positive impact through investments in deeper carbon analysis, biodiversity initiatives, enhanced recycling processes, and innovative materials, it recognises the need for tailored green finance solutions to support its ambitious goals.

Morris believes that access to specialised green finance options would accelerate their sustainability journey and enable them to make an even greater impact. The company actively seeks support in the form of simplified reporting standards, sustainability-linked financial products, and expert guidance to navigate the green finance landscape and unlock the capital needed to drive transformative climate action.

Despite the widespread availability of green finance products, offered by 73% of financial institutions, our study suggests that only 2.8% of SMEs have applied for green finance in the past three years. This significant gap highlights the immense potential for growth in SME uptake of these sustainable finance options.


About our analysis of the green finance opportunity: With the right support and simplified reporting processes, SMEs could unlock a $789 billion green finance opportunity, based on economic analysis conducted by NatWest applied to Sage survey data. Sage’s 2023 study⁶ found that these improvements could triple the number of SMEs reporting on sustainability – from 7.7% to 23.1%, representing an additional 51 million businesses globally.

The key to unlocking this opportunity: the ‘virtuous circle’
Our study, building on three years of tracking SME climate action and sentiment, reveals a powerful mechanism to encourage climate action: a ‘virtuous circle’ that connects sustainability reporting, sustainable finance, and enhanced climate action for SMEs worldwide. This circle represents a practical pathway to accelerate SME involvement in addressing climate change when we see:

• Widespread sustainability reporting: SMEs measure and report their environmental impact, gaining insights into their operations, carbon footprint, and areas for emissions reduction.
• Increased sustainable finance for SMEs: Improved reporting enhances SMEs’ credibility with investors and lenders, increasing access to green financing options.
• Enhanced climate action: With better access to finance, SMEs can implement more substantial sustainable practices, such as investing in energy-efficient equipment or developing low-carbon products and services.

Currently, our survey suggests that only 1.2% of SMEs are fully engaged in this virtuous circle.

However, it also shows that SMEs with access to sustainable finance are 2.5 times more likely to implement significant sustainability initiatives, and those with comprehensive sustainability reports are 1.5 times more likely to be successful in securing financing.
<<End Box>>

To accelerate SME climate action, we must unlock this virtuous circle. This report provides actionable recommendations for policymakers, financial institutions, and technology providers to support SMEs, focusing on streamlined reporting, improved access to finance, and enabling action through digital tools. By harnessing this mechanism, we not only drive sustainability efforts but also boost SMEs’ financial health and resilience, creating a win-win scenario for businesses and the environment.

1. Sustainability reporting:

• SMEs begin by measuring and reporting their environmental impact.
• This process provides clear insights into where they can reduce emissions, improve resilience, and become more efficient.
• As SMEs take actions, they can monitor changes over time and report on their successes to external stakeholders.

2. Sustainable finance:

• Improved and simplified reporting enhances SMEs’ credibility with investors and lenders.⁷
  • This leads to increased access to green financing options and sustainability-linked loans.
  • Financial institutions can more confidently support SMEs’ green initiatives, knowing their impact and progress is being tracked with reliable data.

3. Climate action:

• With better access to finance, SMEs can implement more substantial sustainable practices.
  • This might include investing in energy-efficient equipment, adopting renewable energy sources, or developing low-carbon products and services.
  • In turn, these actions can be successfully reported on, providing more comprehensive and transparent data for the next round of sustainability reporting.

Banks are now expected to measure and report the greenhouse gas emissions resulting from their investments and loans. This is called measuring their “financed emissions.”⁸ 

To help with this, a new standard has been created: the Partnership for Carbon Accounting Financials (PCAF) Standard. This standard provides a consistent way for banks to:

• Measure their financed emissions
• Identify major sources of these emissions
• Set targets to reduce these emissions

To meet this standard and show progress in reducing their financed emissions, banks need accurate data from the companies they invest in or lend to. This data helps banks:

• Understand their current level of financed emissions
• Track changes in these emissions over time
• Demonstrate progress towards their emission reduction goals

As more attention is focused on climate change, banks are increasingly being evaluated on how well they measure and reduce their financed emissions using this standard.




Raylo  Enabling the circular economy through green finance
Raylo, a pioneering UK-based company founded in 2018, is transforming the consumer electronics industry with its innovative “lease-and-reuse” model. By extending the life of smartphones, laptops, and tablets through refurbishment and recycling, Raylo is significantly reducing carbon emissions and pollution in a typically waste-heavy sector.

To support Raylo’s growth ambitions and new product development, NatWest structured a refinancing of Raylo’s Revolving Credit Facility. NatWest played a crucial role in assisting with the development of Raylo’s Green Financing Framework and securing a positive rating from S&P Global Ratings, validating Raylo’s circular business model and commitment to sustainability.

Richard Fulton, Co-founder and Chief Risk Officer at Raylo, credited the green loan from NatWest as a catalyst for formalising and enhancing the company’s sustainability data and governance. The financing has enabled Raylo to offer more affordable prices to customers while expanding their relationship with NatWest.

Raylo’s success story demonstrates the power of tailored green finance solutions in supporting SMEs’ sustainability goals and driving the transition to a circular economy. By leveraging innovative financing structures, companies like Raylo can scale their impact and lead the way in making technology both accessible and sustainable.

This report offers targeted recommendations for policymakers to empower SMEs on their sustainability journey.

Our focus areas include:

By leveraging this virtuous circle, we can simultaneously drive SME climate action and enhance their financial resilience. The result is a win-win: accelerated progress towards sustainability goals coupled with improved business performance for SMEs.

NatWest  Automation in action: NatWest Carbon Planner powered by Sage Earth
The NatWest Carbon Planner, powered by Sage Earth, is a free tailored solution designed to help UK businesses manage their future fuel and operational costs and reduce their carbon footprint more quickly. The financial services sector is stepping up to support SMEs, and NatWest’s Carbon Planner is automating a key part of the process of calculating a company’s greenhouse gas emissions.

The Carbon Planner processes data from a company’s accounting software and matches transactions to emission factors to create an estimate of the climate impact of those purchases. The software then guides the business to refine their emissions estimate by submitting additional data, such as energy usage and employee commuting patterns.

In addition to cutting emissions, the platform has the potential to reduce inefficiencies, save time and money, and help businesses become more competitive. The NatWest Carbon Planner also provides information and useful resources to help businesses on their journey to net zero.

Available online to all UK businesses, not just NatWest customers, this example demonstrates how collaboration across sectors can make it possible for SMEs to reduce the burden of reporting through digital tools and automation, supporting them in their sustainability efforts while improving their overall business performance.