New SME Sustainable Finance Standard Proposed to Improve Access to Green Funding

The Platform on Sustainable Finance presents a voluntary approach to support SME access to sustainable finance in the EU.

On 21 March 2025, the Platform on Sustainable Finance, an advisory body to the European Commission, published a report titled “Streamlining Sustainable Finance for SMEs.” The report introduces a voluntary framework — the SME sustainable finance standard — designed to help small and medium-sized enterprises (SMEs) improve access to sustainability-linked financing.

This proposed standard aims to simplify the way SMEs demonstrate their environmental sustainability performance to banks and other financial institutions.

What Is the SME Sustainable Finance Standard?

The SME sustainable finance standard is a streamlined, voluntary approach that allows SMEs and their financiers to classify loans and other financing instruments as sustainable finance. The standard is designed to:

• Support simplified sustainability disclosures from SMEs

• Enable financiers to assess SME environmental performance

• Bridge current reporting gaps between SMEs and funding providers

The standard builds on experience gained from implementing the sustainability guarantee under the InvestEU programme and its associated tools.

Why This Standard Was Proposed

SMEs make up over 50% of the EU's GDP and are responsible for more than 63% of enterprise-related greenhouse gas emissions. Their role is considered central in the EU’s transition to a net-zero, resilient, and environmentally sustainable economy.

Despite this, most SMEs rely on internal funding for sustainability projects. When they seek external financing, their primary source is typically bank loans.

However, they face persistent challenges:

• High minimum loan thresholds

• Complex regulatory requirements

• Lack of awareness or capacity to manage sustainability disclosures

• Limited applicability of the EU Taxonomy, which was not designed with SMEs in mind

These challenges hinder the ability of SMEs to access sustainable finance and disclose climate-related impacts effectively.

Key Features of the Proposed Standard

The SME sustainable finance standard includes the following elements:

• Voluntary Use: It is not a mandatory requirement, allowing SMEs to opt in as needed.

• KPI-Based Disclosures: SMEs can disclose key performance indicators to demonstrate climate-related efforts to lenders.

• Digital Support Tool: The report proposes the development of an online tool tailored to SMEs to assist in disclosure and data processing.

• Focus on Climate: Initially, the standard is limited to climate-related sustainability topics. There is an intention to expand its scope to cover additional environmental objectives over time.

How the Standard Supports Both SMEs and Lenders

By using the SME sustainable finance standard, SMEs can present structured information to potential lenders in a consistent format. This may allow banks and financial institutions to:

• Better understand and compare SME sustainability data

• Align such data with internal sustainability frameworks

• Classify SME-related financing under sustainable finance labels more clearly

According to the report, simplifying disclosures and improving standardization could lower barriers to sustainable finance and reduce administrative burden for both SMEs and banks.

About the Platform on Sustainable Finance

The Platform on Sustainable Finance is an expert group advising the European Commission on the development and implementation of sustainable finance policies. Its recommendations are intended to support the improvement of the EU sustainable finance framework.

This report is independent and non-binding but aims to inform future policy and market practices. The standard is also presented as a complementary initiative, not as a substitute for broader sustainability reporting obligations under frameworks such as the CSRD or the EU Taxonomy.

🔗 Access the full report here: Streamlining Sustainable Finance for SMEs

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