Energy & Environment
Access to Green Finance for Small and Medium-Sized Enterprises in the United Kingdom by
Rebecca Flowers and Irina Tabacaru
An increasing number of countries across the globe have started to seriously acknowledge the international climate emergency that society currently faces. As a response, some governments and political institutions are stepping up and declaring country-wide zero emissions targets, as well as environmental plans with the aim of creating more inclusive, resilient and green economies in the long-term. With the announcement of the UK government’s Carbon Neutrality Plan for 20501 and the UK’s Green Investment Plan2, it appears that climate change is coming to the forefront of British domestic policy. As the UK prepares to host the 26th United Nations Climate Change Conference (COP26) in November 2021, it is relevant to consider the steps that are being taken by the UK government from a local to a national level to mitigate the consequences of climate change. This policy proposal will focus on small and medium-sized enterprises (SMEs)’ access to green finance in the UK. Ac-
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cording to the G20 Green Finance Study Group, green finance represents the “financing of investments that provide environmental benefits in the broader context of environmentally sustainable development. […]”.3 We have decided to focus on SMEs specifically for two reasons. Firstly, as of 2019, SMEs, businesses with 0 to 49 employees, represent 99% of all UK businesses.4 They typically feature heavily in the supply chains and the operational make up of larger companies. SMEs also tend to be more flexible, quicker to innovate and adapt to new trends and technologies. SMEs, therefore, create spillover knowledge that improves multinational corporations.5 These are all critical elements for tackling climate change. The extent to which SMEs can drive and deliver on the promise of a net zero emissions economy is conditioned by their access to finance. However, the well-known financial and knowledge constraints that SMEs often contend with are exacerbated in the face of explicitly green access.6 For example,
