The LSB calls on financial services companies to address the challenges faced by SMEs in accessing sustainable and green financial products.

Financial services companies are being urged by the Lending Standards Board (LSB) to address the difficulties that small and medium-sized businesses (SMEs) encounter in gaining access to sustainable financial products. While there is an increasing demand for green financing among SMEs, many companies still run into obstacles including cost, complexity, and a lack of information, according to the self-regulatory organization for banks and lenders.

The LSB’s findings show that only a small number of registered businesses, with different levels of consumer uptake, provide particular green finance solutions to SMEs. Financial services companies frequently provide green loans with an emphasis on efficiency enhancements, including the acquisition of electric vehicles and modifications to real estate.

“As the drive to transition to net zero continues to intensify, firms should be considering, across all finance products, how they can help customers to achieve their green objectives, while balancing the effects of the wider landscape,” stressed Emma Lovell, chief executive of the LSB.

The LSB research also emphasizes the necessity of aligning the broader financial services industry with the increasing emphasis on green and sustainable activities. There is an increasing need to take into account how financial products and services might promote green and sustainable aims, even while regulatory efforts have mostly concentrated on disclosure requirements for larger enterprises and the labeling of investment products.

“The broader financial services industry needs to take into account how its goods and services are used to assist sustainable or green activities. The research states that as a result, businesses and SMEs are taking extra steps to better understand their environmental effect and how the items they offer or use affect the environment.

Greener financial advice

The inclusion of green finance for SMEs will be examined as part of the Lending Standards Board’s ongoing assessment of the Standards of Lending Practice for Business Customers. The consultation aims to address problems with digital channels, assistance for companies with financial problems, and expectations of enterprises. Comments on the consultation are welcome through August 10, 2023.

It gives interested parties the chance to provide their opinions and thoughts to help determine the direction of green financing for SMEs in the UK.

“Firms should be understanding how their products – whether they are labelled as green or sustainable, or not – can support the SME’s objectives,” added Lovell. “For customers looking to borrow or use finance to make changes that are positive for the environment, firms should be understanding how their products can support the SME.”

Emails should be sent to [email protected] or [email protected] with any comments regarding the issues identified throughout the consultation.

The Treasury Committee this week opened a fresh investigation into lending to small and medium-sized businesses (SME) and small business access to capital. The cross-party committee of MPs will look at the main obstacles small businesses (SMEs) encounter when trying to get financing, how small business lending is regulated, and what the government can do to improve lending to SMEs.

Green finance
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