Global Sage Report Reveals $789 Billion Green Finance Opportunity for SMEs

• 73% of banks want to offer green finance to small businesses, but need emissions data to measure returns
• 89% of SMEs using green finance say it is vital to their sustainability goals, but only 2.8% of SMEs have applied for it in the last three years
• C• Complex application process, stringent reporting standards and data quality issues block SMEs from accessing green funding

Sage, the leader in accounting, financial, HR, and payroll technology for small and medium-sized enterprises (SMEs), has recently launched ‘Unlocking Sustainable Finance for SMEs’ a global report which exposes a gap between SMEs’ sustainability ambition and their ability to take action, preventing them from accessing vital green finance needed to drive their initiatives.

Created in partnership with the International Chamber of Commerce (ICC), the report highlights that while 86% of SMEs say that sustainability is important to their business, only 9.1% formally report on their impact, citing complex reporting requirements as a major roadblock (74%).

The data revealed a “virtuous circle” between sustainability reporting, green finance and climate action SMEs that report on their impact are then more likely to secure funding to become more sustainable, which in turn, helps them take further steps towards net-zero. This would also help financial institutions who say data challenges are a huge barrier to offering green loans (84%). Currently, however, only 1.2% of SMEs are leveraging this virtuous circle to grow sustainably.

Sage and ICC launched this report at COP29 in Baku, urging global decision-makers to bridge the gap between SMEs’ growing sustainability ambitions and their ability to act, by calling for simplified reporting standards and access to green finance.

To fully unlock the potential of SMEs in combating climate change, Sage calls on governments, financial institutions and technology partners to:

• Simplify sustainability reporting – Implement proportionate and streamlined reporting standards tailored to SMEs, making it easier for them to access green finance.
• Expand access to digital tools – Equip SMEs with affordable, automated tools to track emissions and streamline reporting.
• Increase financial incentives – Offer tax credits, grants, and favourable loan terms to motivate SMEs to measure their environmental impacts and invest in sustainable practices.

The report also found:

• Interest and engagement with climate change is fast rising. 86% of SMEs state that sustainability is crucial to their business, up from 83% last year, and 72% believe they can contribute to tackling climate change. However, only 63% are currently taking steps to reduce their environmental impact.
• Action is growing but at a much slower pace. 68% of SMEs say the cost of implementing sustainability initiatives is too high, and 67% cite time constraints. These barriers are growing rather than decreasing, slowing down climate action.
• Finance is key to unlocking more action. 89% of SMEs that secured green finance say it was crucial to their sustainability efforts, but only 19% have considered external financing for environmental initiatives.
• SMEs are looking to technology to help bridge the gap between intention and action. 73% of SMEs are concerned about the upfront costs of sustainability reporting, and 66% are worried about its complexity. However, 65% believe digital tools could help simplify the process and unlock the benefits of green finance.
• Pieter Bensch, Managing Director and Executive Vice-President for Sage Africa & Middle East highlighted the growing commitment of South African SMEs to sustainability, stating, “While South African SMEs place a lower priority on environmental initiatives and are less convinced of their role in tackling climate change compared to their global counterparts, they are showing a growing commitment to sustainability and taking steps to reduce their environmental impact. A significant 42% already have established sustainability policies, and another 49% are planning future improvements, revealing a clear willingness to adopt greener practices.”

“Additionally, 37% of South African SMEs would be more likely to ramp up sustainability efforts with easier access to sustainable financing, with 57% prioritising renewable energy installations—outpacing their global counterparts,” Bensch added.

John W.H. Denton AO, Secretary General at ICC said: “We believe that SMEs are a crucial, and often overlooked, community in conversations about net-zero. We strongly support the report’s call for simplified, standardised sustainability reporting and the development of accessible digital tools to help them get started on their sustainability journey. Our goal is to create an enabling environment for SMEs to fully contribute to the achievement of the Paris Agreement goals and the Sustainable Development Goals.”

Nigar Arpadarai, The UN Climate Change High-Level Champion for COP 29 said: “As we gather in Baku for COP29, the urgency of our climate crisis has never been more apparent. Azerbaijan, as the host nation, has set an ambitious agenda that recognises the critical role of SMEs in our global fight against climate change. This report couldn’t be more timely or relevant to our discussions.”

To read more about Sage’s sustainability efforts, including its Sustainability & Society strategy, please visit: Sustainability and Society | Commitment and plans | Sage RSA (https://www.sage.com/en-za/company/sustainability-and-society/)

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Author: Lovejoy Shangase from Burson on behalf of Sage.

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