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Fintech leaders call for government-discounted green loans to accelerate UK SME drive to Net Zero

24 Oct 2021

With small businesses responsible for around half of the carbon emissions generated from business and industry, a group of financial services providers and influential small business organisations have signed an open letter calling for a tangible solution to hit climate goals by 2050

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With environmental summit COP26 opening in Glasgow on 31 October, a group of financial services providers and small business leaders are lobbying the government to adopt proposals designed to reduce the carbon footprint of UK SMEs and make the nation a world leader in green finance. 

British Business Bank estimates that small companies are responsible for around half of the UK’s industrial emissions, yet just 20% of small businesses have committed to a Net Zero target, according to a British Standards Institution survey. This is in contrast to 50% of larger businesses. 

Concern over additional and unnecessary cost is cited as the primary reason for the lack of activity. In the government’s Greening Finance: A Roadmap to Sustainable Investing, the Chancellor Rishi Sunak stated that “greening the financial system is an integral part of my plans for the future of the UK’s financial services” but to-date financial products that marry both commercial competitiveness and ESG-related benefits have not been offered to SMEs. Not addressing this could derail the government’s 2050 Net Zero target.

The group is calling on the government to act now by providing the right incentives to enable targets to be hit. It proposes two key measures:

  1. A government-backed guarantee (50% of losses), in respect of eligible commercial ESG-related lending to small businesses, administered through  British Business Bank in a similar manner to BBLs and CBILS; and/or

  2. A £1bn ESG Lending Pool of capital to be run by state-owned British Business Bank, that is match-funded by institutional private capital, for lenders to originate loans to ESG-oriented business and/or for ESG-related purposes.

Led by business Finance marketplace Funding Options and alternative lender Swishfund, the open letter has been co-signed by some of the biggest names in fintech and the small business community, including Enterprise Nation, Capitalise, Fintech North, Inchorus as well as Greenr, an organisation that enables businesses to baseline emissions, support offset projects and engage their employees to reduce emissions at source through their gamified mobile app and web dashboard, and Carbon Footprint Ltd, which for almost 20 years has guided private companies of all sizes and public sector organisations on tracking and reducing their environmental impact. The open letter calls for HM Treasury to open discussions with a view to announcing measures in the 2022 UK Budget, if not sooner.  

The problem, it states, is that “for many small businesses, environmental responsibility is seen as an additional and unnecessary cost, and lenders with a strong ESG brand are considered expensive and/or unsuitable for small business lending”. 

The group argues that issuing government-backed guarantees on ESG loans to visibly cover losses, via the infrastructure used to deliver the Coronavirus Business Interruption Loan and Bounce Back Loan schemes (CBILS and BBLS), will bring the positive benefits of green-bonds, social-bonds and sustainability-linked bonds into the small business environment.  

“We will only achieve cultural change in the small business community when ESG and commercial competitiveness become happy bedfellows,” the open letter states.

Simon Cureton, Chief Executive Officer at Funding Options, comments: “SMEs, not necessarily through fault of their own, are moving too slowly in the Race to Zero because they are not financially incentivised to make climate change a priority. We’re at a critical juncture, from which decisive and affirmative action is required urgently to collectively open the path to Net Zero. Today, there is a very clear causal link between the economic productivity of our small business community and the nation’s carbon emissions. To stem and reverse that, these businesses require the requisite infrastructure and support to allow sustainability goals and commercial viability to co-exist - especially as they rebuild following the crippling effects of the pandemic. As a group we believe the green loans measures we are calling for will incentivise positive and long-term change for the benefit of the planet.”

Andrew Jackson, Managing Director at Swishfund, comments: “The prevention of climate change means battling the human condition that prioritises short-term profits over long-term losses. Ambitious businesses that grow in strong and sustainable ways prioritise long-term gains over short-term costs.  This commonality of long-term investment is why good business is fundamentally aligned with reducing climate change. Since people usually only pay attention to what is in front of them, it is incumbent on the financial services industry to promote commercially attractive products to small businesses, which also deliver ESG-related benefits. Unfortunately, small business lending in the UK is not yet mature enough, which is why we need the UK Government to kickstart SME green loans, and pioneer a world-leading business culture change. Without competitively priced financial products that actively promote climate-friendly solutions and processes, we will fail to bridge the gap between the good intent of SMEs and the action required to make a difference.”   

ENDS

About Funding Options

Funding Options is a leading data-driven marketplace for business finance, helping SMEs get the right funding in place so they can trade, plan and grow with confidence. With over 120 leading lender partners, Funding Options has helped more than 10,000 businesses across the UK and Netherlands secure over £0.5bn in funding. 

In a highly fragmented SME lending ecosystem, Funding Options is fast becoming the de facto marketplace for business finance, connecting businesses, lenders and partners in a frictionless digital journey. The company is transforming the way SMEs access finance through a combination of award-winning technology which uses data analytics, open banking APIs and Artificial Intelligence, and a dedicated team of experienced Business Finance Specialists to ensure borrowers can make informed decisions and have access to funding within minutes. 

Recognised as a fast-growth scaleup, Funding Options was named in the top 25% of the FT 1000, the annual list of Europe’s fastest growing companies and is part of Silicon Valley Comes to the UK’s(SVC2UK) 2020 Scale Up Club cohort, a prestigious annual list of fast-growth UK technology companies destined for great things.

Swishfund

Swishfund is an alternative lender to small businesses in the UK (and Netherlands). The UK business offers a 1.5% APR discount to all carbon neutral customers (as a kind of sustainability-linked bond, but for small businesses), and offsets 10 tons of carbon for every new loan.  

The ambitious team is driven to create a truly sustainable and responsible business, which is also a profitable private enterprise. Swishfund’s mission is to "Make finance feel good, for everyone". They have five core principles that differentiate them from other alternative lenders. The thread through these values is that, whilst keeping up with the age of data and technology, they take important extra steps to ensure that human relationships and kindness are not being left behind. This approach covers all aspects of their business, especially in how they support neurodiversity and environmental responsibility.

Swishfund is a carbon-negative company and has been awarded the Cabinet Office’s prestigious Customer Service Excellence (CSE) Standard (with three Compliance Plus certificates). It has also been awarded Newcomer of the Year at the Credit Collections & Risk Awards 2021.

Funding Options

Funding Options

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