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SMEs and entrepreneurship

OECD Platform on Financing SMEs for Sustainability

 

COP26 Logo Logo 1 of 2What is the issue?

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.

 

How can the Financing SMEs for Sustainability Platform address these challenges?

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:

 

 Knowledge sharing and exchange

  • The Platform showcases good practices that financial institutions and governments have implemented to boost the provision of sustainable finance for SMEs, including both demand- and supply-side interventions.
  • It will also explore approaches to financing different types of SMEs to support the range of green actions they take (e.g. biodiversity, circular economy).
  • Pilots could serve to operationalise relevant models by additional countries and institutions.
  • Participants will work together to develop a set of mutually agreed objectives and principles to guide the various actors in financing SMEs for sustainability.

 Analytical research and data improvements

  • The OECD Secretariat and Platform participants will develop and share new and ongoing research on financing SMEs for sustainability, focusing on the specific challenges these firms face. Work will leverage data from across the OECD (e.g. SME financing Scoreboard indicators, firm-level data, sectoral data, environmental and finance data), as well as data collected by Platform participants (available survey data, bank data e.g. on the provision of green loans or climate related credit), and additional government data).
  • Research will also seek to assess different programmes, schemes, and financial products, and identify good practices.
  • The Platform will feed into an OECD report on “Financing SMEs for sustainability” and the development of a repository of good policy practices for knowledge sharing.

Networking and policy dialogue

  • Through ongoing dialogue at monthly Platform member meetings, quarterly Steering Committee meetings at CEO/senior level and an annual conference, the Platform will convene and engage public and private financial institutions, policy makers, investors, regulators, SMEs, international organisations, and experts on sustainable finance around the globe to inform the design and implementation of policies and frameworks that will contribute to including SMEs in the green transition. It will contribute to environmental global processes and initiatives, such as the COP.
  • The Platform will engage financial institutions of diverse sizes and types, in order to represent the highly diverse finance market for SMEs, in line with the G20/OECD High-Level Principles on SME Financing.
  • It will enable peer-to-peer learning among financial institutions to accelerate the growth of green financing and investment for SMEs.
  • Different formats will be adopted to facilitate exchange among participants. In particular, roundtables, webinars, presentation of research findings and discussion of case studies, and policy experiences to analyse and showcase successful practices implemented by governments and financial institutions.
  • The Platform will collect regular feedback and experiences from partners on the latest developments on sustainable and green financing for SMEs.
  • The Platform strives for geographic diversity as well as the recognition of different challenges and pathways to boost SME demand for and ease SME access to sustainable and green finance. 

 

Events

The OECD High-level event on Financing SMEs for Sustainability in the COP26 brought together the OECD, public financial institutions focused on SME financing, and the business sector to discuss the main drivers and challenges for sustainable financing of SMEs, promising sustainable finance models and instruments for SMEs, as well as the role of policy in accompanying SMEs on their journey to net zero. The event highlighted the role for international cooperation in this area, and announced the creation of the OECD Platform on Financing SMEs for Sustainability hosted by the OECD Centre for Entrepreneurship, SMEs, Regions and Cities.

 

Webinar “The Road to Net Zero: Where do SMEs stand?”

The first webinar in the series sought to take stock of the current landscape and the opportunities and challenges that SMEs face in their journey to net zero. In the face of substantial knowledge gaps on SMEs and greening, many institutions are conducting research to establish a baseline for measuring progress on this journey. The webinar offered the opportunity to shed light on questions such as:

- Where do SMEs stand in their journey to net zero, in terms of awareness, actions and investments?
- What are the key drivers motivating SMEs to adopt green processes and develop green products?
- How do SMEs differ in their approaches according to firm size, sector and region of operation?
- What is the role of finance, and what can financial institutions and policy makers do to support SMEs?

 

Webinar “Engaging SMEs in Sustainability: Tools and Approaches?”

This webinar explored approaches and tools that can increase SME awareness and incite SMEs to take actions and invest in sustainability. It provided an overview of the landscape for sustainability performance disclosure and how this is likely to impact SMEs going forward. It identified ways for financial institutions and other actors in the ecosystem to engage SMEs in a dialogue on sustainability and incentivise them to undertake investments in greening. In particular, it explored different approaches, including through sustainability-related certifications, to strengthen SME awareness of their environmental footprint and the potential they have to contribute to solutions. It brought together various actors in the SME finance ecosystem, including sustainability certification organisations, public financial institutions and SMEs to answer the following key questions:

- How are governments seeking to incentivise the private sector through regulations, standards and disclosure requirements, and what are the likely impacts on SMEs? 
- How can public and private financial institutions and other actors engage with SMEs, in particular through non-financial services and tools?  
- What are the key issues and messages that resonate with SMEs and can effectively incite them to take action towards greening?
- What role can voluntary reporting and certification play in helping SMEs advance on the journey to net zero?

 

Research

Blogs

Contact

To learn more contact Miriam.Koreen@oecd.org or Marija.Kuzmanovic@oecd.org


with the support of:

 

This is the logo of the partners of the Financing for Sustainability program of the OECD.

 

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