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Cambridge Institute for Sustainability Leadership (CISL)

17 January 2023 – The University of Cambridge Institute for Sustainability Leadership (CISL), ​Business for Social Responsibility (BSR), the We Mean Business Coalition (WMBC) and the SME Climate Hub have published a new report highlighting the role of commercial banks and multi-national corporations in helping small and medium sized businesses (SMEs) reach net zero.

 Role of banks and buyers download

Download the report here.

Addressing barriers to SME net zero action

There is no net zero economy without SMEs transitioning to net zero aligned operations. However, they face several barriers that hinder their decarbonisation journey, including lack of knowledge, limited time, and lack of standardised guidance on emissions reporting. Banks and major corporates – those that finance and buy the products and services of SMEs – are well equipped to support SMEs’ net zero action, and with their own net zero commitments, it is essential that they do so.

Collaborative Innovation Sprint process

In summer 2022, CISL and BSR, under a grant from WMBC, convened practitioners, including commercial banks from the Banking Environment Initiative (BEI), multi-national corporations, financial innovation specialists, and an international group of SMEs, for a series of innovation sprints to better address the barriers SMEs face to reach net zero.

Proposed solutions

Participants from the sprints generated the following potential solutions to drive change and support SME net zero action:

  • Climate Readiness classification process based upon market segmentation by stage, size, sector, and location criteria, and co-development of a diagnostic tool to assess SMEs Climate Readiness, promoting internal knowledge and action amongst SMEs about net zero, paired with appropriately calibrated transition resources.
  • Centralised, shared ESG/emissions data repository between SMEs, corporates, and banks that triangulates data points for better scope-based progress reporting along supply chains. This repository can then be used to incentivise SME reporting and transition more effectively.
  • SME decarbonisation roadmaps (benchmarks) incentivising opportunities and encouraging behaviour change.
  • A marketplace that provides net zero transition support services for thematically clustered SMEs, corporates, and banks.

Next steps

Each of the above suggested solutions yields a specific set of R&D next steps. However, they need not be stand-alone solutions but could be mutually supportive, as there is overlap in the proposals. For example, a one-stop platform for banks, buyers, and SMEs that provides the space for mutual support in net zero efforts, benchmarking, data exchange and financial incentive could constitute a nexus between the four proposed approaches that emerged from the innovation sprints.

Both banks and buyers through their commitments to net zero, economy-wide exposure, and resources can play a key role in bridging the net zero financing gap by experimenting with incremental and radical innovations. This innovation sprint process can be the first step toward further collaborative R&D that helps to close the SME net zero action gap.

Grant Rudgley, Banking Environment Initiative Lead, CISL said:

“Small businesses are the backbone of global economies. Supporting them on their journey to net zero is a key priority of their banks, requiring new financial products and advisory solutions. This report begins to meet that requirement, summarising innovations bankers themselves see as necessary and feasible to accelerate small business decarbonisation.”

Giulio Berruti, Director, Climate, BSR said:

“Small and medium enterprises (SMEs) make up a significant portion of the world economy, and while their actions are critical to reaching net zero globally, support is currently lacking. Most large companies rely on several thousand SME suppliers, and banks often serve large numbers of SME customers. As such, both banks and large companies have an important role to play in incentivizing SME action to net zero. I am proud of the work that BSR and CISL did with this report, co-creating solutions that could drastically accelerate the pace of net zero transformation for SMEs.”

Pamela Jouven, Director, SME Climate Hub said:

“The SME Climate Hub was founded to help small and medium sized businesses reduce their carbon emissions and access the business incentives of taking climate action. We cannot reach our global net zero goals or create thriving economies without bringing these businesses on board, and they cannot take the action needed without the proper tools and support. With our Financial Innovation research, we're gaining a better understanding of how initiatives like the SME Climate Hub can help catalyse the right financial support to meet SMEs’ needs."

Citing this report

University of Cambridge Institute for Sustainability Leadership (CISL) and BSR. (2023). Financial Innovation for SME net zero transition: Role of Banks and Buyers.

Published: January 2023 

Authors and acknowledgements

The authors of this report are Dr Mohsen Gul, Grant Rudgley, and Annabel Ross at the Cambridge Institute for Sustainability Leadership (CISL) Centre for Sustainable Finance and Giulio Berruti, Giulio Pagnacco, and Julie Dugard at BSR. They were supported at CISL by Eliot Whittington, Erenn Ore, and Dr James MacPherson and at BSR by Berkley Rothmeier, David Wei, and Erin Leitheiser.

The research was grant funded by We Mean Business Coalition. The authors would like to sincerely thank Lydia Elliott and Claire McCarthy at the Coalition for their support throughout the project.

We would also like to thank the following individuals for their contributions during the research and participation in the innovation sprints:

Thom Marx (CISL), Anna Voronkova (AbInBev), Petar Georgiev (Ampeco), Rachel Whitehouse (Bank of America), Douglas Ruller (Bank of America), Claire Reid (Barclays), Daniel Berwick (Barclays), Katryn Wright (Better Business Behaviour), Julie Sammons (Center for Information Technology Research in the Interest of Society), Bodo Sentker (Deutsche Bank), Max Prehn (Deutsche Bank), Oli Cook (Ekko), Dina Alnahdy (Entec), Daryn Park (Federation of Small Businesses), Friederike Andres (Federation of Small Businesses), Shelley Lawson (Frog Bikes), Clair Smith (HSBC), Pierrick Beraud (HSBC), Tara Schmidt (Lloyds Banking Group), Ola Olaofe (Lloyds Banking Group), Rich Lees (Lloyds Banking Group), Lindsey Lagesse (Mastercard), Faiza Haq (Mastercard), Edmond Chan (Microsoft), Ash Hannig (Microsoft), Maria Carvalho (NatWest), Jane Franch (Numi Tea), Gabriella Diana (Onesta), Alexander Malaket (OPUS Advisory Services), Danielle Standish (Pukka Herbs), May Elwany (Salus Global), Kirsty Meldrum (Santander), Miguel Gonzalez Huerta (Santander), Emily Pearson (Vancity), Thomas Verhagen (WeESG), Dinni Lingaraj (Wipro), and Aditi Saha (Wipro Foundation).


Copyright © 2023 University of Cambridge Institute for Sustainability Leadership (CISL).

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The opinions expressed here are those of the authors and do not represent an official position of CISL or The University of Cambridge.