The Lending Standards Board (LSB) is calling on financial services to provide their input on protecting standards for business customers in green finance. This comes as many smaller businesses continue to struggle in accessing sustainable financial products, despite the growing demand.
According to the LSB, there are approximately 15 green finance products available to small and medium-sized enterprises (SMEs), but their accessibility levels vary. The most common product offered is green loans, which specifically target SMEs looking to make efficiency improvements in their operations.
However, financial firms need to go beyond simply offering these products. They need to consider how their offerings can help SMEs achieve their green objectives, especially given the increasing focus on transitioning to a net-zero economy.
One of the main challenges faced by smaller businesses is the barriers they encounter when trying to access green finance products. This could be due to factors such as high costs, limited capacity, and a lack of information. In the past two years, SMEs have prioritized survival over sustainability, which has led them to overlook investing in green finance.
Despite these challenges, the demand for sustainable finance is on the rise. SMEs are becoming more aware of the importance of incorporating sustainability into their business models. However, the information about available options is still limited, making it difficult for them to make informed decisions.
To address these issues, financial services need to collaborate with SMEs and provide them with clearer information about the benefits and accessibility of green finance products. This could involve working closely with industry associations and government bodies to disseminate relevant information and raise awareness about the existing options.
Furthermore, financial firms should also consider offering tailored solutions that specifically address the barriers faced by smaller businesses. This could involve developing products with lower costs, flexible terms, and simplified application processes, all of which would make green finance more accessible to SMEs.
While the demand for sustainable finance is growing among SMEs, there are still significant barriers preventing them from accessing green finance products. Financial services need to take proactive steps to address these challenges by providing clearer information, offering tailored solutions, and collaborating with industry associations and government bodies. By doing so, they can help smaller businesses achieve their green objectives and contribute to the transition towards a more sustainable economy.
