Connecting SMEs to climate finance: closing the US$1.1 trillion SME climate finance gap

Small businesses account for over 90% of business worldwide, making them central to the green transition. The sixth annual ICC-Sage survey finds that SMEs are ready, willing and able to invest, but the finance they need is not reaching them. Three policy levers could help close the gap.

With attention now turning to implementation of the New Collective Quantified Goal (NCQG) on climate finance agreed at COP29 in Baku, ICC is calling on COP31 in Antalya to address not only the volume of climate finance, but also the practical barriers that determine whether it reaches the real economy: access, the cost of capital and bankability.

How big is the SME climate finance opportunity?

Many SMEs have already adopted low-cost climate measures they can fund themselves. The next phase involves higher-cost measures – such as installing solar panels or replacing equipment – which will require much greater investment. An estimated 46 million SMEs are ready, willing and able to take these steps. To do so, they need around US$1.1 trillion of outside investment over the next 12 months: US$946 billion for the transition and US$167 billion for adaptation.

Why is green finance not reaching small businesses?

Global climate finance passed US$2 trillion in 2024, yet only 1% of surveyed SMEs received green finance. This gap persists even as  climate finance applications have risen by more than two-thirds since 2023. The report finds that the connection between capital and SMEs breaks in two places:

• Small loans cost too much for lenders to serve: checking and monitoring a small loan costs lenders too much relative to its returns.
• The data that would bring that cost down is not reaching lenders easily: 30% of SMEs still collect sustainability data by hand, spending around 12 working days a year on this task. Almost half of those with a reporting system were asked for the same information in different formats, adding further complexity.

At the same time, much green investment also goes uncounted. Only approximately 33% of SMEs engaging with green finance could name a formally labelled product, because many fund climate measures through ordinary loans and overdrafts.

What are the three levers that can connect SMEs to finance?

The data lenders need increasingly sits in the accounting and e-invoicing software SMEs already use and 74% say they would  allow this data to be shared with lenders and large customers. ICC and Sage call on governments, standard-setters, financial institutions and other key actors to work across three critical levers:

1. Report once, use many times. Governments, standard-setters and financial regulators shouldadopt one short, machine-readable SME data set which lenders, buyers and public bodies all accept.
2. Make SMEs’ everyday software the channel for green finance. Governments, together with accounting, e-invoicing, payments and banking providers, should enable sustainability data to be generated from e-invoicing, open banking and accounting systems and share only with the business’s consent.

Make green finance fit SMEs. Banks and development finance institutions should offer small-ticket green loans pre-filled from accounting data and backed by public guarantees, while improving the labelling of green lending already on banks’ books