The ambitious climate-related targets set out in the Paris Agreement cannot be achieved without the green transition of small and medium-sized enterprises (SMEs). SMEs are critical actors in global climate efforts, not only as drivers of technological change, but also as adopters of green business models and practices to reduce their environmental footprint. However, ensuring small businesses can finance their green transition will require the engagement across a range of actors in the financial ecosystem, including public and private financial institutions, regulators, rating providers and others.
Public and private financial institutions have a critical role to play in financing this transition and providing non-financial support in terms of awareness raising and practical tools to help guide SMEs on the journey to net zero. In doing so, they can help boost SMEs’ demand for green financing and investment.
However, public and private financial institutions alike, face considerable challenges in accompanying their SME clients in the green transition. Obtaining accurate and comparable data on SMEs’ ESG performance is challenging in light of limited reporting requirements as well as SMEs’ capacity constraints. The lack of common and aligned methodologies and frameworks for ESG integration in investment strategies and risk management adds another layer of complexity. Banks and other financial institutions also face challenges associated with regulatory uncertainty. Finally, supply of sustainable finance and development of financing instruments are also strongly driven by demand signals – and SME demand, even if rising, is still relatively limited.
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The OECD Platform on Financing SMES for Sustainability, launched on 2 November 2021 on the margins of the COP26, provides a forum to advance knowledge sharing, data and analytical work, and policy dialogue on sustainable finance for SMEs. By bringing together public and private financial institutions, governments, Fintech companies, regulators and SME representatives, the Platform aims to bridge existing knowledge and awareness gaps and develop and share innovative, workable solutions and good practices for finance providers, SMEs and governments. This work aims to accelerate SMEs’ and financial institutions’ green transition.
Financial institutions stand to reap important benefits from enhanced policy dialogue with public financial institutions, governments and regulators. Furthermore, peer-to-peer learning can help them implement effective solutions to boost SME awareness and demand for sustainable finance products.
Three pillars underpin the development of the initiative: data collection and analytical research, knowledge sharing and exchanges, and networking and policy dialogue:
1/ Knowledge sharing and exchange
2/ Analytical research and data improvements
3/ Networking and policy dialogue
with the support of: