What Changed
- Identified a US$1.1 trillion external funding need for 46 million ready SMEs over the next 12 months (US$946B for transition, US$167B for adaptation).
- Reported that despite global climate finance exceeding US$2 trillion in 2024, only 1% of surveyed SMEs received green finance.
- Proposed three policy levers: standardized SME data sets, software-driven data sharing, and pre-filled small-ticket green loans backed by public guarantees.
### Background and Context
Small and medium-sized enterprises (SMEs) account for over 90% of businesses worldwide, placing them at the core of the global green transition. Despite their systemic economic importance, many small businesses struggle to access the external capital required to fund sustainability initiatives. Following discussions surrounding the New Collective Quantified Goal (NCQG) on climate finance agreed at COP29 in Baku, the International Chamber of Commerce (ICC), in collaboration with Sage, published its sixth annual joint survey and report. The findings highlight that while SMEs possess the willingness and operational capability to invest in sustainability, practical barriers in the financial architecture prevent capital from reaching the real economy. Looking ahead to COP31 in Antalya, the ICC calls on international policymakers to move beyond total volume targets and directly address operational hurdles concerning access, the cost of capital, and project bankability.
### The US$1.1 Trillion Financing Gap
While many small businesses have already adopted low-cost, self-funded climate measures, their transition to the next stage demands significantly higher capital investment. These next-phase measures include installing solar panels or replacing industrial and operating equipment. The ICC-Sage report estimates that roughly 46 million SMEs globally are currently prepared, willing, and able to take these capital-intensive steps.
To execute these measures, SMEs require approximately US$1.1 trillion in outside investment over the next 12 months. This capital requirement consists of:
- US$946 billion dedicated to climate transition measures; and
- US$167 billion dedicated to climate adaptation measures.
Although total global climate finance surpassed US$2 trillion in 2024, a major disconnect remains: only 1% of surveyed SMEs actually received green finance. This shortfall persists even as SME climate finance applications have risen by more than two-thirds since 2023. Additionally, related analysis within the report identifies a $789 billion green finance opportunity for small businesses, pointing to a gap between SMEs' sustainability ambitions and their practical capacity to secure funding.
### Structural Bottlenecks in Green Lending
The report finds that the connection between lenders and small businesses breaks in two key areas:
1. High Lender Costs for Small Loans: Checking, evaluating, and monitoring small-ticket loans costs lenders too much relative to the financial returns generated.
2. Data Disruption and Inefficient Reporting: The data needed to reduce lender underwriting costs is not easily accessible. Currently, 30% of SMEs collect sustainability data manually by hand, spending roughly 12 working days per year on this task. Furthermore, almost half of SMEs with an established reporting system report being asked for the same information in different formats, creating added complexity.
In addition to these structural barriers, much green investment remains uncounted. Only about 33% of SMEs engaging with green finance could name a formally labelled green product. Many small businesses fund their climate measures through ordinary, unlabelled commercial loans and overdrafts, leaving their efforts unrecorded in formal green finance statistics.
### Three Critical Policy Levers
To bridge the SME climate finance gap, the ICC and Sage call on governments, financial regulators, standard-setters, and financial institutions to collaborate across three critical policy levers:
1. "Report Once, Use Many Times": Governments, standard-setters, and financial regulators should adopt one short, machine-readable SME sustainability data set that lenders, corporate buyers, and public bodies all accept.
2. Leverage Everyday Software as a Channel: Governments, together with accounting, e-invoicing, payments, and banking providers, should enable sustainability data to be generated directly from e-invoicing, open banking, and accounting systems, shared only with business consent. Notably, 74% of surveyed SMEs indicated they would allow this data to be shared with lenders and major customers.
3. Make Green Finance Fit SMEs: Commercial banks and development finance institutions should offer small-ticket green loans pre-filled using automated accounting data and backed by public guarantees, while improving the labelling of green lending already on bank balance sheets.
### Alignment with Broader Sustainable Trade Frameworks
The report builds upon broader collaborative work between Sage, the ICC, PwC, and Oxford Economics. Previous joint studies explored the economic and environmental impacts of SMEs in specific markets—such as the United Kingdom and South Africa ahead of COP27—and analyzed ways to streamline reporting standards to reduce environmental impact.
To further support sustainable commerce, the ICC established the ICC Principles for Sustainable Trade and Trade Finance. These principles offer clear, transparent, and consistent guidelines alongside standardized definitions to mitigate the risks of greenwashing and social-washing. Designed to support businesses in meeting both the UN Sustainable Development Goals and the Paris Agreement objective of limiting global warming to 1.5°C above pre-industrial levels, the principles help banks, corporates, and investors effectively channel capital into sustainable trade finance.
### Frequently Asked Questions
Question: How much external investment do SMEs require for climate measures over the next 12 months?
Answer: According to the report, approximately 46 million SMEs require US$1.1 trillion in outside investment over the next 12 months, comprising US$946 billion for transition and US$167 billion for adaptation.
Question: What percentage of surveyed SMEs received green finance despite rising application numbers?
Answer: Only 1% of surveyed SMEs received green finance, despite global climate finance exceeding US$2 trillion in 2024 and SME climate applications rising by more than two-thirds since 2023.
Question: How much time do SMEs spend manually collecting sustainability data?
Answer: 30% of SMEs collect sustainability data by hand, spending around 12 working days per year on this task.
Question: Are SMEs willing to share accounting data for green finance purposes?
Answer: Yes. 74% of SMEs surveyed stated they would allow sustainability data from their accounting and e-invoicing software to be shared with lenders and large customers.
Question: What is the purpose of the ICC Principles for Sustainable Trade and Trade Finance?
Answer: The ICC Principles provide clear guidelines and standardized definitions to mitigate greenwashing and social-washing. They help direct capital toward sustainable trade finance while aligning business practices with the UN Sustainable Development Goals and the Paris Agreement target of limiting global warming to 1.5°C.
Who May Be Affected
Small and medium-sized enterprises (SMEs), commercial banks, development finance institutions, financial regulators, standard-setters, and accounting software providers globally.
Cross-Border Context
The report addresses international climate finance delivery mechanisms tied to COP negotiations (COP27, COP29, COP30, COP31), UN Sustainable Development Goals, and the Paris Agreement 1.5°C target across global supply chains.
What to check next
- Follow updates on the implementation of the New Collective Quantified Goal (NCQG) from COP29 Baku to COP31 Antalya.
- Monitor adoption of standardized machine-readable SME sustainability reporting data sets by financial regulators.
- Review updates regarding the ICC Principles for Sustainable Trade and Trade Finance.
This article provides general information and does not constitute legal advice. Consult the official text and obtain advice appropriate to your circumstances where needed.