What is sustainable finance?
Sustainable finance is the process of taking environmental, social and governance (ESG) considerations into account when making investment decisions. This leads to more long-term investments in sustainable economic activities and projects, such as renewable energy or electric vehicles.
Why is this important?
Increasingly, larger financial organisations are devoting greater resources to meet these goals as we transition to a sustainable economy. Often defined as net zero, circular or restorative, this new kind of economy is inclusive, resilient and exhibits high levels of social and environmental justice.
Small businesses have an important part to play in the journey to net zero emissions, with research from NatWest highlighting a £160 billion revenue opportunity for small businesses as a result of the drive to tackle climate change. There has never been a better time for small businesses to act.
Small businesses have a role to play: whether it be towards the five million homes that need better insulation and three million heat pump retrofits (85% of the UK total); the 125,000 electric vehicle charge point installations required (48% of the UK total), or the installation of 22GW of renewable power capacity per year (34% of the UK total).
What does it mean for small businesses when it comes to finance either to meet their target or to invest to take advantage of the revenue opportunities?
Whilst few businesses will have heard of - or be able to access - Green or Sustainable Bonds, there are a growing number of financial products increasingly rewarding businesses that consciously seek to reduce their carbon footprint.
However, for small businesses to be able to do their bit to achieve net zero or benefit, action and help is needed in six key areas.
Financing options that reflect the societal benefit of delivering climate action.
Support to recognise the strengthening opportunity from climate action. This support needs to be applied to their specific business context and should highlight the key skills required to transition successfully.
Help to improve small businesses’ climate action knowledge, whether to meet reporting standards or specific sector knowledge to reduce their impact, for example through new farming practices or heat pump installations.
Skills and capabilities
Help to develop new skills to deliver a business transition, including retraining and upskilling employees and achieving relevant accreditations and certification.
Small businesses looking to unlock broader climate action need improved financial certainty of the benefits of doing so. For example, regulation can help to ensure that roll-out rates for infrastructure like electric vehicle charge points identified by the Climate Change Committee are achieved, or to reduce the costs of the transition.
Finally, small businesses need support to navigate the complex and evolving landscape, including prioritising different opportunities, understanding what support is available, and, ultimately, realising the benefit to their business.
Where can I find more support?
FSB Funding Platform gives you greater transparency and awareness of the funding options available to support small businesses. FSB’s sustainability hub is also home to further resources, events and guidance.
FSB Funding Platform is free to use for FSB members and helps drive down the cost of borrowing - not only through the use of our unique technology but also through our excellent engagement with lenders. Indeed, some lenders already have financial products rewarding businesses that consciously seek to reduce their carbon footprint. Get started with your application here.