10 Aug 2021
The government’s vision to ‘Build Back Greener’ following the Covid-19 pandemic sets out a policy direction for the UK to reach its carbon emissions reduction target of 78% by 2035 compared to 1990 levels. But a new report from Bankers for Net Zero argues that for SMEs to implement sufficient carbon reduction policies and regulatory requirements, more financial support is needed.
Green Finance promotes the flow of financial capital towards the development and implementation of sustainable business models. In the context of SMEs, this outcome may relate to reducing greenhouse gas emissions (GHG) from their business’ own operations or to facilitate the development of a green project.
Understandably, Green Finance is a hot topic and it’s gaining traction around the world. Take green bonds, for instance. According to Netherlands-based asset manager NN Investment Partners, the global green bond market is set to grow from EUR 662/672 billion (in 2020) to EUR 1 trillion by the end of 2021 and EUR 2 trillion by the end of 2023.
Businesses can seek green finance from a variety of lenders. At Funding Options, we have simplified this for businesses by defining a green lender as having at least one of the following:
A product specifically tailored to the purchase or leasing of green assets
A proposition developed to support green businesses
An appetite to fund businesses at a different pricing rate who have renewable, low/zero carbon or sustainable business activities, products or services
A sustainability, ESG or green policy.
Green lending helps businesses transition to net-zero by allowing them to invest in decarbonising their operations, products and services. It also enables SMEs to better manage any transition risks they may be exposed to (risks that materialise as the wider economy transitions to a ‘green economy’, such as upward pressure of fossil fuel costs, changing demands from customers and suppliers).
Some green lenders offer competitive finance rates in order to support business’ net-zero transition initiatives According to the World Economic Forum, typical projects that fall under the green finance umbrella include:
Renewable energy and energy efficiency
Pollution prevention and control
Circular economy initiatives
Sustainable use of natural resources and land.
A circular economy is a model of production and consumption that involves recycling existing materials and products for as long as possible, and therefore, moving away from the take-make-consume-throw away linear model.
From funding electric vehicles to sustainable food production, it’s never been more important for lenders to lend green.
Finance experts argue that unless the industry is able to finance green projects for SMEs at speed and scale, the UK may fail to reach its net zero emissions by 2050 target. Business finance is critical for ensuring the transition to a net zero economy is successful. According to Bankers for NetZero, it will enable “companies to thrive in a regenerative future.”
Bankers for NetZero is an initiative involving banks, businesses and regulators.
Its aim is to enable lenders to support clients when it comes to accelerating the transition to net zero and delivering on the UK government’s ambitions for addressing climate change. It’s supported by Barclays, Handelsbanken, Triodos, Ecology Building Society, ClearBank and Tide.
A recent report from Bankers for Net Zero warns that the UK's SMEs could be “forgotten or left behind” in the country's net zero transition, arguing that measures must be implemented to avoid leaving SMEs unprepared to implement carbon reduction policies and regulations. The initiative wants banks and policymakers to ensure SMEs – who represent 99% of British businesses and account for 52% of turnover – are adequately supported.
At Funding Options, we want to play an active role in green lending. Our sustainability policy outlines our commitments to supporting SMEs and our partners to decarbonise the UK economy through sustainable finance. It details how we’re achieving this through our strategy, governance structure, approach to climate opportunities and other targets.
We’re also making it easier for funders to play their part in reducing carbon emissions to help the UK reach net zero by 2050. If you’re interested in facilitating the shift to a low-carbon economy and want to make the world more sustainable by helping businesses access green finance, join our growing panel of green lenders today.
If you have any questions prior or after signing up, we’d love to chat to you about how we can support the growth of green businesses and fund a greener future together. Using a combination of award-winning technology and expertise, we can quickly and accurately match you with the right customers.
High street banks
Large independent providers
Niche alt-fi providers
Likewise, if you’re a green business owner whose core mission is rooted in sustainability, or if your company is looking to purchase a green asset such as an electric vehicle or a solar panel, use our platform to get access to the right green lending options quickly and easily.
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