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1、Financial innovation for SME net zero transition:Role of banks and buyersThe 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
2、.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.AcknowledgementsThe research was grant funded by We Mean Business Coalition.The authors would like to sincerely thank Lydia Elliott and Claire McCarthy at
3、 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),Doug
4、las 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(
5、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),E
6、dmond 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),Thoma
7、s Verhagen(WeESG),Dinni Lingaraj(Wipro),and Aditi Saha(Wipro Foundation).Citing this reportUniversity of Cambridge Institute for Sustainability Leadership(CISL)and BSR.(2023).Financial Innovation for SME net zero transition:Role of Banks and Buyers.Copyright 2023 University of Cambridge Institute fo
8、r Sustainability Leadership(CISL).Some rights reserved.The material featured in this publication is licensed under the Creative Commons Attribution NonCommercialShareAlike License.The details of this license may be viewed in full at:Creative Commons Attribution-NonCommercial-ShareAlike 4.0 Internati
9、onal CC BY-NC-SA 4.0The University of Cambridge Institutefor Sustainability LeadershipAuthorsThe University of Cambridge Institute for Sustainability Leadership partners with business and governments to develop leadership and solutions for a sustainable economy.We aim to achieve net zero,protect and
10、 restore nature,and build inclusive and resilient societies.For over three decades we have built the leadership capacity and capabilities of individuals and organisations,and created industry-leading collaborations,to catalyse change and accelerate the path to a sustainable economy.Our interdiscipli
11、nary research engagement builds the evidence base for practical action.3Financial innovation for SME net zero transition:Role of banks and buyersExecutive Summary There is no net zero economy without small and medium-sized enterprises(SMEs)transitioning to net zero aligned operations.Yet only 60 per
12、 cent of SMEs have a plan to reach net zero.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 a
13、re well equipped to support SMEs net zero action,and with their own net zero commitments,it is essential that they do so.The Cambridge Institute for Sustainability Leadership(CISL)and BSR convened practitioners,including commercial banks from the Banking Environment Initiative(BEI),multi-national co
14、rporations,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.Participants from the sprints generated the following potential solutions to drive change and support SME net zero action:Clima
15、te 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 r
16、esources.Centralised,shared ESG/emissions data repositorybetween 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 roa
17、dmaps(benchmarks)incentivising opportunities and encouraging behaviour change.A marketplace that provides net zero transition support servicesfor thematically clustered SMEs,corporates,and banks.Each of the above suggested solutions yields a specific set of R&D next steps(see Table below 1).However,
18、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
19、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.Thi
20、s innovation sprint process,which took place in summer 2022,can be the first step toward further collaborative R&D that helps to close the SME net zero action gap.4Financial innovation for SME net zero transition:Role of banks and buyersxTable 1:Next steps for each solution area based on innovation
21、sprintsSolution areaProposed solutionNext steps for each solution area Knowledge-basedClimate 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 knowled
22、ge and action amongst SMEs about net zero,paired with appropriately calibrated transition resources.Develop SME market segmentation criteria to classify stage-,size-,sector-,and location-appropriate information Develop with SMEs a diagnostic tool for SMEs to self-assess their Climate Readiness and c
23、lassify according to segmentation criteria Identify and develop technical and financial incentives for SMEs to use the readiness tools and resource packages provided by banks and buyers Banks and buyers can support existing platforms in arranging knowledge and resources based on SME net zero transit
24、ion maturity and sectorsTechnology-basedCentralised,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 eff
25、ectively.Identify the key drivers and stakeholder groups for the traceability of evidence-based data Develop criteria for data confidence and reduce the need for explicit auditing Source data entry points to triangulate data for better scope-based progress reporting Rapid trial of data incentives an
26、d their effectiveness in encouraging SMEs to use existing data repositories for emissions reportingBehaviour-basedSME decarbonisation roadmaps(benchmarks),incentivising opportunities and encouraging behaviour change.Identify the specific behaviours that SMEs need to achieve decarbonisation Tailor th
27、e roadmap provided to decarbonisation behaviours(e.g.,use a carbon calculator,switch to a renewable energy provider,identify providers of recyclable packaging,etc.)Co-identify existing resources,tools,and information that SMEs can use with their clientele and in their value chains or benefit most fr
28、om during the roadmap Co-develop a benchmarking methodology with expert stakeholders Business model shifts for banks and buyersA marketplace that provides net zero transition support services for thematically clustered SMEs,corporates,and banks.Identify SME needs to make progress on net zero and dev
29、elop solutions Assess the marketplace utility in relation to existing solutions Develop incentives for SMEs to use the marketplace for solutions,particularly those who are less interested or cannot be engaged Undertake a systematic review of existing interaction platforms to identify incentives and
30、features for thematic aggregation of solutions,service offerings,and networks of banks,buyers,and SMEs on net zero 5Financial innovation for SME net zero transition:Role of banks and buyersContentsIntroduction.61.1 The challenge:only 60 per cent of SMEs have a plan to reduce emissions .6Barriers to
31、SME net zero action.7Lack of knowledge.7Limited time.7Lack of standardised guidance on SME sustainability reporting.7Missed opportunities.7Lack of business-to-business support from SME customers .7USD 50 trillion SME net zero financing access gap.71.2 Banks and buyers ideally positioned to support S
32、ME net zero action .71.3 How can banks and buyers further increase SME net zero action?.8Levers of change to support SME net zero action .92.1 Knowledge-based .92.2 Technology-based.102.3 Behaviour-based.112.4 Business model shifts for banks and buyers.12Innovation sprints to devise new types of sup
33、port.133.1 Sprint design.133.2 Innovations devised.15Conclusion and suggested next steps.23References.25Appendix A.261.Challenges faced by buyers and banks in supporting the SME net zero transition.262.Details of scope 1-3.273.Further information about innovation sprints.2712346Financial innovation
34、for SME net zero transition:Role of banks and buyersThis report is about how banks and buyers(major corporates e.g.,Microsoft)can play a greater role in supporting SME action towards net zero,complementing the actions of policymakers.It summarises the outcomes of an innovation sprint process aimed a
35、t elucidating how both parties can play this greater role and,by doing so,overcome the SME net zero transition gap.1.1 The challenge:only 60 per cent of SMEs have a plan to reduce emissionsSMEs1 account for 99 per cent of businesses globally and,in the Organisation for Economic Co-operation and Deve
36、lopment(OECD)region,are responsible for 60 per cent of industrial emissions(OECD,2017).If they do not reduce emissions,there is no net zero economy,but SMEs are largely struggling to start their transition to net zero.Only 60 per cent have a plan to achieve net zero,while the rest cite challenges re
37、lated to lack of resources and internal expertise(see Figure 1):1 The research uses SME Climate Hubs definition of a small to medium sized enterprise as a company with up to 500 employees.Figure 1:SME Climate Hub Survey findings(2021)Introduction1Results from the SME Climate Hubs survey:50%of small
38、businesses calculate emissions48%delay climate action due to a lack of funding60%of small businesses plan to reduce their carbon impact40%delay climate action due to a lack of time2/3of small business owners worry they dont have the skills/knowledge to tackle the climate crisis70%of SMEs need access
39、 to external funds to reduce their emissions faster or at all63%delay climate action due to a lack of skills and knowledge1/3 of SMEs have been offered a financial incentive to reduce emissionsSource:smeclimatehub.org7Financial innovation for SME net zero transition:Role of banks and buyersIntroduct
40、ionBarriers to SME net zero actionLack of knowledge SMEs often lack knowledge about the net zero transition,especially in emerging markets where the enabling policy environment and push from their customers is less strong(IFAC,2022).In the UK,34 per cent of business owners and managers attributed a
41、lack of knowledge as the main barrier to having a sustainability strategy for net zero action(Lloyds Bank Business,2022;NatWest,2022).Limited timeSMEs often lack the time to deal with the policy,market,and reporting pressures to reduce their carbon footprint(Kauffmann&Cusmano,2022).Time devoted may
42、also not be productive,as SMEs have reported confusion and overwhelm when trying to navigate available decarbonisation guidance.Lack of standardised guidance on SME sustainability reportingOne of the most frequently cited barriers to action by SMEs participating in the research was the lack of stand
43、ardised guidance on sustainability frameworks for reporting,especially for SMEs at the early stages of their net zero journey.Missed opportunitiesLack of business-to-business support from SME customers(buyers of SME goods and services)Most SMEs shared that they had not been contacted by their custom
44、ers(buyers)2 regarding their sustainability and climate action efforts.While some large companies have started to engage and support suppliers on climate action,SMEs are often deprioritised as companies first focus on larger suppliers with the most material GHG impact.USD 50 trillion SME net zero fi
45、nancing access gapAccess to financial support is another frequently referenced impediment to SME action on net zero(WSP,2021).SMEs face a disadvantage with respect to large firms when accessing finance,owing to opacity,under-collateralisation,and high transaction costs.Half of the estimated$100trn i
46、nvestment needed to get global supply chains to net zero by 2050 will need to go to SMEs3(HSBC/BCG,2020),see Figure 2.1.2 Banks and buyers ideally positioned to support SME net zero action Whilst both banks and buyers face their own challenges to support SME decarbonisation(see Appendix A),they can
47、play a meaningful role in bridging the net zero financing gap through their commitments,economy-wide exposure,and resources,as well as help remove other obstacles related to knowledge,reporting,and net zero implementation across their supply chains.Moreover,both corporates and banks have made ambiti
48、ous net zero targets:2 The terms buyers,corporates,and multi-national companies(MNCs)are used interchangeably in the report.3 For this calculation,SMEs are defined as businesses with 250 employees.Sources:WEF&BCG report on net zero supply chains,GFMA&BCG report on the 100-150 Trillion opportunity,Or
49、bis database,literature review,BCG analysisNote:Segmentation of businesses is defined as follows;small businesses have 50 employees/$10M turnover,medium businesses have50-250 employees/250 employees and over$50M in turnoverAll global supply chainsSmall businesses20-30%$0.6T-1.5T/yearMedium businesse
50、s15-25%$0.5T-1.3T/yearLarge businesses50-60%$1.5T-3T/year$3-5 Trillion/year$100+Trillion between 2020 and 2050Figure 2:Estimated investment needed to reach net zero across global supply chains(BCG&HSBC,2021)8Financial innovation for SME net zero transition:Role of banks and buyers Many corporations
51、have set ambitious net zero targets to meet before or by 2050,per science-aligned recommendations from initiatives such as the SBTi Net Zero standard and the UN Race to Zero campaign.Achieving these targets will require companies to drastically reduce supply chain(Scope 3)emissions.These supply chai
52、n emissions are estimated to be 11.4x the average companys Scope 1&2 emissions(CDP,2021).4 As each company is dealing with hundreds or thousands of SME suppliers,SME decarbonisation is therefore critical to reaching their climate goals.Some banks have made similar commitments regarding financed emis
53、sions in their lending portfolios that reflect the real economy and prevalence of SMEs(e.g.,Net Zero Banking Alliance).With exposure to clients supply chains,banks with a large global footprint spanning the largest corporations and smallest micro-businesses can leverage their position to share techn
54、ical expertise and stimulate financial support for net zero transitions.1.3 How can banks and buyers further increase SME net zero action?The USD 50 trillion net zero financing gap indicates the need for innovation that better delivers on the existing and other yet undefined opportunities to acceler
55、ate SME net zero action.Table 2 outlines some of the opportunities for banks and buyers to support SME net zero action.These listed opportunities are not mutually exclusive and both banks and buyers can use these to support SMEs.To innovate methods to bridge the financing gap,the Banking Environment
56、 Initiative(BEI)at CISL and BSR convened relevant individuals from banks,major corporates,financial innovation specialists,and SMEs together for a series of innovation sprints.We determined four key levers that banks and buyers can use to drive change and facilitate SME net zero action to offer clar
57、ity on the areas in which innovation is required,and provide structure for the sprints.These levers of change are:1.Knowledge-based:developing or distributing knowledge2.Technology-based:new technology or technology applications3.Behaviour-based:supporting behaviour change of clients and suppliers4.
58、Business model shifts:imagining the bank and buyers business models of a net zero futureThese levers represent ways banks and corporates can take positive action to support SMEs in reaching net zero,complementing the actions of policymakers.The subsequent sections of the reports detail each lever an
59、d the results of these innovation sprints.Table 2:Opportunities for buyers and banks to support SME net zero actionOpportunities for banksOpportunities for buyersRaise awareness amongst SMEs of the financial implications,both of opportunities linked to net zero leadership and the costs of inaction(C
60、ISL,2020).Connect SMEs to the practical tools,resources,and vendors needed to enable climate action.Assess the climate-related financial risks of an SME and actively support them to mitigate these risks.Reward SMEs via climate standards in their own supply chains,for example,requiring suppliers to r
61、eport on GHG emissions and/or set reduction targets.Reward supplier SMEs taking climate action with better businesse.g.,bigger and longer-term contracts and/or a preferential status.Develop traditional and non-traditional financial products and services that facilitate and incentivise net zero trans
62、itions.Connect investors,large corporations,and small business clients with experts that can support the transition of the business,including the provision of tools to measure and report emissions footprints.Raise consumer awareness by amplifying communications efforts to share SMEs sustainability a
63、chievements.4 See Appendix A for diagram of Scope 1-3.Introduction9Financial innovation for SME net zero transition:Role of banks and buyersThis section defines the levers of change and articulates how these levers can be used by banks and major corporate buyers to help SMEs on their decarbonisation
64、 journey.A spotlight on current solutions for each lever is provided to highlight examples of action already being taken.2.1 Knowledge-basedSMEs increasingly want to incorporate the latest information about net zero action into their business and financing processes but often struggle accessing this
65、 knowledge,which can be highly technical,dynamic,or sector specific.Banks and major corporates use a variety of methodologies for collecting carbon data from their SME clients and suppliers.These reporting methodologies often do not fit together easily,creating the impression amongst SMEs that net z
66、ero action is a burden,not an opportunity.Additionally,frameworks like the Science Based Targets initiative(SBTi),the Task Force on Climate-related Financial Disclosures(TCFD),the Carbon Disclosure Project(CDP),and the Global Reporting Initiative(GRI)focus more on larger firms and are challenging to
67、 apply in SME contexts(WBCSD,2020).In 2021,CDP in collaboration with SME Climate Hub developed a disclosure framework specifically tailored to SMEs:A climate disclosure framework for small and medium-sized enterprises(SMEs).In addition to the introduction of new tools,resources,and frameworks,develo
68、ping mechanisms to ensure relevance and accessibility of the existing tools is also a limitation to SME climate action.Knowledge-based solutions are needed to resolve such challenges,and the below table features an innovation spotlight on existing solutions from banks and buyers:Levers of change to
69、support SME net zero action2Table 3:Innovation spotlight on knowledge solutions from banks and buyersBanksBuyers/large corporates Lloyds Banking Group developed a Banks Green Buildings Toolas a free,interactive digital tool,which allows businesses to calculate buildings energy efficiency and any pot
70、ential savings that sustainable changes could produce.NatWest Group has developed aNatWest Carbon Tracker applicationthat provides SMEs with an estimate of their carbon footprint.Lloyds Banking Group has a BankSustainability Hub,which includes aNow to Net Zerofive-step guide to support business owne
71、rs on embarking on a cleaner journey with guidance on how to measure,mobilise,and monitor progress.PepsiCo issued a$1 billion Green Bond that will partly be used to proactively help their suppliers often SMEs understand their greenhouse gas(GHG)reductions in their own businesses,including how to cal
72、culate their GHG footprints and set science-based targets.To support emissions disclosure and reduction,Microsoft addressed the top request from their suppliers the need for simple,comprehensive GHG accounting resources and recently launched a tools and resources hub to aid their suppliers efforts10
73、Financial innovation for SME net zero transition:Role of banks and buyersLevers of change to support SME net zero action2.2 Technology-basedTechnology can enable SMEs to track their progress towards net zero,increase their understanding of net zero,improve access to financial services and connection
74、s that can support their decarbonisation journey(e.g.,user-friendly,digital tools to enable emissions reporting).Technology allows new relationship interfaces between banks,buyers and SMEs.It can serve as the foundation for engagement with SME clients and suppliers and financial products related to
75、net zero action.SMEs require a tailored,yet scalable approach that captures the variety of needs.Adaptive,automation technologies are essential for assessing SME net zero progress and providing incentives to decarbonise.New enabling technologies such as data science and satellite monitoring can faci
76、litate new business models and digital financial products to incentivise SMEs.An innovation spotlight on possible technology-based solutions and incentives by banks and major corporate buyers reveal the following:Table 4:Innovation spotlight on technology-based solutions from banks and buyersBanksBu
77、yers/large corporates ADB Ventures(ADBV)supported the development and launch of SatSure,which uses satellite technology to gather information through a data analytic platform to enable financial institutions to optimise credit decision-making in the agricultural sector.JUMO is a predictive technolog
78、y platform developed in 2015 that uses artificial intelligence/machine learning and behavioural data derived from mobile usage to create financial identities for SMEs that do not have access to formal financial services as well as to offer other financial products to the SMEs.JUMO partners with mobi
79、le network operators across Africa and South Asia to gain access to customers data to assess creditworthiness and offer real-time,customised loans and savings products to SMEs over their mobile phones.Funding Circle was founded in 2010 as a global peer-to-peer(P2P)/Marketplace lending platform focus
80、ed on SMEs.It leverages Big Data analytics to expertly match SMEs that need capital with a wide variety of investors,including individuals,banks,asset management companies,insurance firms,and national and supranational entities,such as KfW and the European Investment Bank(EIB).In 2019,CISL coordinat
81、ed a pilot programme,dubbed Project Trado,in which Sainsbury and Unilever teamed up with BNP Paribas to offer preferential supply chain finance pricing to tea producers in Malawi in return for the provision of sustainability data through blockchain based platform,Halotrade.UNEP FI(2016),in its finte
82、ch inquiry report,presented a range of prototype ideas,including the development of a blockchain-enabled collateral management registry for SMEs based on the model used by the International Monetary Fund.Another solution presented was the creation of Smart Asset Trade Finance(SATF)as a combination o
83、f Internet of Things(IoT)and blockchains smart contracts to provide smart trade finance services,leveraging IoT to tag their claims on physical assets,making them trackable and traceable.A CISL report presented a snapshot of these and other fintech innovation solutions.Fawry(Eqypt)has introduced inn
84、ovative digital products to help SMEs obtain financing.In 2019,the company launched an electronic platform for consumer goods companies that allows electronic ordering of products by SMEs.The platform also assists in providing finance for merchants by studying the digital transaction data as it rela
85、tes to sales per merchant and their needs(World Bank,2020)11Financial innovation for SME net zero transition:Role of banks and buyersLevers of change to support SME net zero action2.3 Behaviour-basedSupporting behaviour change of clients and suppliers towards engaging SMEs is critical for effective
86、net zero transition.Banks and major corporate buyers need to leverage insights they already have about influencing behaviour(consumer or corporate)to prompt new behaviours amongst themselves and SMEs to access information,services,and experiences.SMEs say they want to decarbonise,yet they struggle t
87、o find the time and resources and sometimes do not know where to start.Banks and buyers need to open pathways for SMEs to access information,services,products,and experiences to support SME behaviour change.On this,behavioural science can help guide banks and buyers to make decarbonisation as easy,s
88、ocial,attractive,and timely as possible for SMEs5.As well as initiatives like the SME Climate Hub,there is a growth in private platforms from the likes of Moodys,Lloyds Banking Group,ACCA Global,Mastercard,and many more offering their SME partners assistance in carbon measurement and business strate
89、gies,which promote transparency in reporting and therefore generate behavioural nudges to deliver on decarbonisation amongst SME communities.Banks and buyers can leverage behavioural insights to inform the design of financial incentives for SMEs that can act as positive nudges for further net zero a
90、ction.In recent years,a small number of commercial banks have started to offer lower rates to firms with high sustainability performance,which has revolutionised areas such as recycling.An innovation spotlight highlights behaviour-based solutions and incentives by banks and buyers which can be exten
91、ded to engage SMEs:Table 5:Innovation spotlight on behaviour-based solutions from banks and buyersBanksBuyers/large corporates German footwear and clothing manufacturer Puma launched a financing program for suppliers to reward social and environmental standards with BNP Paribas bank and the fintech
92、firm GT Nexus.If suppliers get a high score on Pumas social and environmental audit,they get a higher share of the invoice upfront,which can cut suppliers financing fees.WBCSD has launched the Carbon Transparency Partnership,which provides a forum for businesses and decarbonisation stakeholders to c
93、ollaborate across industries and geographies.This partnership nudges peers to increase transparency reporting across supply chains,which is a key enabler for strengthened emissions accountability and accelerated decarbonisation.Asda developed Sustain&Save Exchange,an online tool to support supplier
94、interaction in resource efficiency and emissions reduction.The tool is free for suppliers;hosts live events,information,and ideas;and enables sharing of best practices and opportunities for increasing resource efficiency,creating a culture shift in business management towards net zero.Dows Logistic
95、Supplier Award Programs(S4TAR&DowGOL)are designed to encourage and recognise Dows supply chain partners for excellent performance in the areas of safety,sustainability,social responsibility,and service(the 4Ss).The reward system promotes positive action and encourages peers to contribute further.Phi
96、lips,building on the companys existing Supplier Sustainability Performance program,in which more than 250 suppliers participate annually,have taken an active role in supporting its suppliers in identifying decarbonisation opportunities in their factories.This is facilitated through free-of-charge on
97、-site factory energy scans that identify cost-effective reduction measures.This helps improve the accountability and transparency of sustainability action.5 https:/www.bi.team/wp-content/uploads/2015/07/BIT-Publication-EAST_FA_WEB.pdf12Financial innovation for SME net zero transition:Role of banks a
98、nd buyersLevers of change to support SME net zero action2.4 Business model shifts for banks and buyersEvolving banks and buyers relationships with SMEs will prove essential to addressing their own net zero challenges.This will require banks and buyers to introduce incremental and/or radical shifts t
99、o their business processes and models to ensure alignment with the net zero needs of SMEs.For many banks,the future SME financing will necessitate a transformation of their product offer and business processes.Roland Berger(2021)identifies three key principles for banks to develop future-proof busin
100、ess models for SME engagement:optimised customer/client front end,straight-through processing(efficient,transparent,and harmonised),and open system architecture to build on collaboration potential with other financial institutions.While there is an opportunity for business model shifts,the innovatio
101、n sprints and showcases highlighted how existing operations and processes could be optimised within existing business models as a valuable first step.An innovation spotlight on possible changes in business processes for banks and buyers highlights the following:Table 6:Innovation spotlight on busine
102、ss process changes for banks and buyersBanksBuyers/large corporates Bank of Valletta,in collaboration with the Malta Development Bank(MDB),has launched BOV SME Invest,a product aimed at SMEs planning new capital investment projects.BOV SME Invest provides SMEs with easier access to finance through r
103、educed collateral requirements and finance costs.Backed by Asian Development Bank(ADB)s AAA credit rating,ADBs Trade Finance Programme provides guarantees and loans to over 200 partner banks to support trade,enabling more companies throughout Asia to engage in import and export activities.Sri Lankas
104、 Commercial Bank of Ceylon launched green development loans worth up to US$165,000.Aimed at SMEs,the loans are available at below-market rates and repayable over seven years with a grace period of one year.Brazils Banco Votorantim offers better financing terms to clients that maintain high social an
105、d environmental standards.Using its own procedures,Banco Votorantim scores borrowers based on their environmental and labour performance.Egypts biggest private lender,Commercial International Bank(CIB)launched the countrys first ever private sector green bond in advance of COP27.An emerging type of
106、fixed-income security,green bondsgenerate capital for development projects with environmental benefits.CIB has raised$100 million through the bond,money that will be lent to Egyptian businesses seeking to build energy-efficient buildings or improve their energy and waste management.PepsiCo is engagi
107、ng high maturity suppliers one-on-one at the leadership level to align on priorities and collaborative initiatives.With agricultural suppliers,PepsiCo engages in development and implementation of on-farm projects as well as improvements in operational efficiencies and renewable electricity sourcing(
108、WBCSD,2020).In 2018,BT launched a sustainability contract clause,with Nokia as one of the first signatories.As of 2021,12 key suppliers have a clause in their commercial contracts with BT or Openreach that commits them to make measurable carbon savings over the term of the contract.The key processes
109、 in implementing the clause is getting agreement to participate from suppliers and facilitating the understanding that opportunities will exist for energy savings and therefore carbon reduction.Microsoft is implementing additional sustainability requirements for suppliers.In July 2020,Microsoft upda
110、ted its Supplier Code of Conduct,adding new language to support the companys bold carbon ambitions.This new language requires suppliers to disclose complete,consistent,and accurate Scope 1,2 and 3 greenhouse gas(GHG)emissions data,or the components required to calculate such data.13Financial innovat
111、ion for SME net zero transition:Role of banks and buyersInnovation Sprints focusing on levers of changeNew KnowledgeTechnologyBusiness ModelsBehaviourCurrent Offerings of Bank and BuyersSME Support GapNeed for innovation led by Banks and BuyersInsufficient financial incentivesLimited handholding sup
112、portLack of coordination between large and small clients on net zero transitionCapacityBuy-inFinanceTimeSME BarriersIncreased supply oftraditional and non-traditional finance toSMEs for net zero actionEnhanced SME demandfor climate/green financeEnhanced capacity ofcommercial banks toidentify,finance
113、 andsupport SME net zerotransitionEnhanced capacity ofcorporates to supportSMEs in their supplychains meting net zerotargetsIncreased knowledgedissemination on bestpractices,tools andtechnologiesIncreased awareness ofnet zero benefits forbusinesses and banksIntended ResultsReduced Scope 1,2 and 3 em
114、issions ofSMEs as individualclients or as parts ofcorporate supply chainssupported bycommercial banksIncreased willingness ofSMEs,banks andcorporates to innovaleto amplify net zerocommitments and movepositively forward inthe transition journeytowards 2050 net zerotargetsIntended ImpactsExpanded role
115、 of Banks and Buyers towards SME transitionA series of innovation sprints was arranged to better address the barriers SMEs face to reach net zero.Participants from the sprints generated potential solutions to drive change and support SME net zero action.3.1 Sprint designThe levers of change were use
116、d to structure innovation sprints aimed at creating new ways for banks and buyers to support SMEs.The objective was to develop actionable recommendations that banks and buyers could take forward to incentivise SMEs(suppliers and clients)to take climate action.During the sprints,participants co-creat
117、ed solutions in small groups,with each group focusing on a specific lever for financial innovation as discussed in section 2.The conceptual framework in Figure 3 shows how the series of innovation sprints provided participants the opportunity to collaboratively create“seeds of action”through innovat
118、ion mapping and ideation:Innovation sprints to devise new types of support3Figure 3:Conceptual framework for innovation sprints(2022)The sprints brought together almost thirty practitioners from banks and corporations in 2022,complemented by a geographically diverse panel of financial innovation spe
119、cialists and SME representatives.The sprints were spread across three sessions that involved:14Financial innovation for SME net zero transition:Role of banks and buyersInnovation sprints to devise new types of support1.A group of SMEs presenting the challenges faced in their decarbonisation journey,
120、focusing on the role of financial incentives in reducing emissions,followed by brainstorming activities by banks and buyers with the goal of drafting potential innovations to be explored in the following sessions.2.Expanding the ideas that emerged from session one,resulting in a set of recommendatio
121、ns for each lever for financial innovation.3.Bringing four lever groups back together to share insights and results of the co-creation process.Critically,during the last session,a panel of experts formed by specialists for financial innovation,SME representatives,and BSR,CISL,and We Mean Business Co
122、alition members,reviewed the concepts developed by the four groups and shared feedback and ideas.Participants were supported by a group of specialists who provided feedback and suggestions throughout the process.15Financial innovation for SME net zero transition:Role of banks and buyersInnovation sp
123、rints to devise new types of support3.2 Innovations devisedThe following solutions for each lever of change are based on conclusions from the innovation sprints(see Table 7).Each solution is accompanied by an explanation as to why it has been prioritised and how it might be implemented.They are not
124、mutually exclusive and would benefit from being applied together to help SMEs secure the financial support they need to be able to transition to net zero.Table 7:Innovation and impact map for identified solutions LeverSolution(s)New KnowledgeClimate readiness classificationprocess Ascalableclimate r
125、eadiness classificationprocess wherein SMEs are empowered toself-assess,and within which banks and corporates can deliverstage-,size-,sector-and location-appropriate information,tools,andsolutions to support net zero action.Innovation potential (incremental radical)Impact potential for net zero tran
126、sition(low high)Technology Centralised ESG data repository for SMEs,corporates,and banks A shared data repository governed by an independent entity,providing a one stop shop that centralises data from different sources on scope 1,2 and 3 emissions.Innovation potential (incremental radical)Impact pot
127、ential for net zero transition(low high)Behaviour Behaviourally-informed roadmap for decarbonisation Interactive net zero roadmap that benchmarks SMEs,and,in doing so,provides visibility of peer approaches to decarbonisation,including experience sharing.Tailored to individual businesses,based on ini
128、tial digital assessment.Innovation potential (incremental radical)Impact potential for net zero transition(low high)Business Model ShiftsMarketplace to provide service offers for thematically clustered SMEs,corporates,and banks An aggregated marketplace for networks and service offers for sector-spe
129、cific net zero transition challenges.This marketplace would cluster thematically for SMEs,corporates,and banks.Innovation potential (incremental radical)Impact potential for net zero transition(low high)16Financial innovation for SME net zero transition:Role of banks and buyersInnovation sprints to
130、devise new types of supportLever:Knowledge-basedSolution:Climate readiness classification process Why Context and targeted outcomes for the lever Readiness for and knowledge about,and appetite for,the climate transition journey varies widely across SMEs globally.SMEs themselves are heterogeneous wit
131、h very different sizes and needs.This varietycan result in SMEs receiving mis-calibrated information,tools,orservices for their current stage ofprogression.To develop and deliverrelevant financing solutions,all parties needto be better calibrated to the specific needs and stage of the individual SME
132、s journey to net zero.How Areas for the banks and buyers to research and prepare for SME interactionBanks and buyers can co-develop:A diagnostic tool for SMEs to self-assess their climate readiness and classify according to segmentation criteria SME market segmentation criteria to classify stage-,si
133、ze-,sector-and location-appropriate information Technical and financial incentives for SMEs to use the readiness tools and resource packages provided by banks and buyersWhat Meaningful actions/research/development that will facilitate this solution for decarbonisation with SMEsTo better differentiat
134、e and serve therange of SME needs,it is recommended that ascalableClimate Readiness classificationprocess be developedwherein SMEs are empowered toself-assess.From that classification,banks,buyers,and other partners can deliverstage-,size-,sector-and location-appropriate information,tools,andsolutio
135、ns to support net zero action.It can helpbanks and buyers toa)deploy resourcesmore effectively to current and futureSME partners b)provide a data-informed approach to identifying gaps anddeveloping future products and services c)offer tailored solutions a)engage the optimal SMEpoint of contact for t
136、he net zero journeyTimeline:6-12 months(classification),12-24 months(roll out and monitoring)Where to start or continue Resources/examples/initiatives to help banks and buyers find new and interesting ways to take this solution forwardExamples of approaches include:Route to Net Zero Standard(Carbon
137、Trust)PepsiCos Sustainability Action Center maturity framework(co-developed with BSR)AbInBevs Eclipse self-assessment(co-developed with BSR)BSRs Supply Chain Maturity LadderWho Wider collaboration to recognise the support that banks and buyers might seek to help you better progress with clientsCross
138、-team collaboration is needed with procurement,marketing and data/IT team at banks and buyers.External partnerships are required with a diverse set of SMEs and resource platforms,like the SME Climate Hub.17Financial innovation for SME net zero transition:Role of banks and buyersInnovation sprints to
139、 devise new types of supportLever:Technology-basedSolution:Centralised ESG data repository for SMEs,corporates,and banksWhy Context and targeted outcomes for the leverCorporates increasingly ask their suppliers(including SMEs)about their emissions to report on their own Scope 3 progress.Collecting a
140、nd reporting this data is time-consuming andcostly for the SME.Also,the availability ofsuch emission data is acondition for accessing sustainability-relatedfinance from banks and otherparties.Standardisation of such data represents an opportunity to better incentivise SMEs.How Areas for the banks an
141、d buyers to research and prepare for SME interactionBanks and buyers are recommended to:Co-identify the key drivers and stakeholder groups for traceability of evidence-based data Co-develop criteria for data confidence and reduce the need for explicit auditing Co-source data entry points to triangul
142、ate data for better scope-based progress reporting Co-curate incentives for SMEs buy-in to use the repository for data reportingWhat Meaningful actions/research/development that will facilitate this solution for decarbonisation with SMEsA central data repository which acts as a one-stop-shop for SME
143、s to access standardised emission data and/or other ESG data.This can include open-source data from governments or agencies,as well as data from the SMEs themselves(primary sources).For buyers(corporates):it provides emission and related ESG data about SMEs in supply chains.For banks:links to their
144、internal data systems to inform financial product development and risk quantification.For SMEs:open access to ESG data relevant to Scope 1,2,and 3 indicators per industry.This can help improve their disclosure.Timeline:6 months(planning and data management),6-12 months(build phase),12-18 months(test
145、 phase).18Financial innovation for SME net zero transition:Role of banks and buyersInnovation sprints to devise new types of supportWhere to start or continue Resources/examples/initiatives to help banks and buyers find new and interesting ways to take this solution forwardLeverage data and technolo
146、gyalready available,where possible,and complement with primary data from participants.The technology for an emission database/repository exists,with severalprivate service providers operating in separate ways,e.g.,the GS-1 platform.Furthermore,the Partnership for Carbon Transparency(PACT),hosted by
147、the World Business Council for Sustainable Development(WBCSD),has released the first set of technical specifications for the standardised exchange of carbon emissions data.The specifications will allow different emissions and accounting tech solutions to connect to and understand each othermaking it
148、 easier for businesses to access data.Another initiative,the Carbon Call,is using technology-driven methods to uncover and address gaps in the existing global carbon accounting systems,focusing on carbon removal and land sector,methane,and indirect emissions.Who Wider collaboration to recognise the
149、support that banks and buyers might seek to help you better progress with clientsExisting technology databases,repository platforms,and regulatory and principle setting agencies(e.g.,United Nations Environment Programme Financial Initiative(UNEP FI)and European Commission).Lever:Technology-basedSolu
150、tion:Centralised ESG data repository for SMEs,corporates,and banks19Financial innovation for SME net zero transition:Role of banks and buyersInnovation sprints to devise new types of supportLever:Behaviour-basedSolution:Behaviourally-informed roadmap for decarbonisationWhy Context and targeted outco
151、mes for the leverSMEs face a multitude of transition barriers because of capacity,buy-in,and time,particularly those SMEs who have yet to begin their decarbonisation journey,and the journey can be a daunting one.SMEs need guidance on what they can do(their behaviour)to decarbonise and how to get the
152、re(a roadmap).How Areas for the banks and buyers to research and prepare for SME interactionA huge wealth of information and resources around sustainability reporting exists.However,there is a need to filter this information to best suit SMEs needs for decarbonisation.Banks and buyers can provide SM
153、Es with a roadmap to better access the information flow and build their capacity to effectively transition to net zero.The interactive roadmap will provide actionable steps to support progress and make decarbonisation manageable and achievable for SMEs.Banks and buyers are recommended to:Identify th
154、e specific behaviours that SMEs need to perform to achieve decarbonisation Tailor the roadmap provided to decarbonisation behaviours(e.g.,use a carbon calculator,switch to a renewable energy provider,identify providers of recyclable packaging,etc.)Co-identify existing resources,tools,and information
155、 that SMEs use with their clientele and value chains or benefit most from during the roadmap Co-develop a benchmarking methodology with expert stakeholders Provide incentives to SME clients to interact with the platform toolsWhat Meaningful actions/research/development that will facilitate this solu
156、tion for decarbonisation with SMEsAn interactive roadmap or platform ought to be developed,or an existing one is improved,to chart and benchmark approaches to decarbonisation.Based on their benchmark and position,the interactive platform could help a diverse range of SMEs at different points on the
157、net zero maturity spectrum access tailored resources for each stage,specific sectors,and issues emerging on their net zero journeys.The benchmark and resource can also incentivise SMEs to expand their net zero action,as well as nudge banks and buyers to provide financial and non-financial support to
158、 SMEs that matches best practice according to the benchmark.Timeline:6 months(scoping phase),6-12 months(educational content and tech development),and 12-36 months(engineering and pilot phase).20Financial innovation for SME net zero transition:Role of banks and buyersInnovation sprints to devise new
159、 types of supportWhere to start or continue Resources/examples/initiatives to help banks and buyers find new and interesting ways to take this solution forwardThere are multiple platforms available which can be included in the roadmap to provide interactive,tailored resources and tools.These resourc
160、es can also help SMEs connect more effectively with banks and buyers.For example,the SME Climate Hub can be expanded to include benchmarking and promote decarbonisation behaviours amongst SMEs.Existing initiatives(e.g.,B Corp and SME Climate Hub)could develop a benchmarking methodology with expert s
161、takeholders and then include it in its certification requirements,which ensures that companies commit to continuously improving their sustainability performance.Furthermore,B Corp can provide a platform for buyers and SMEs to connect and share insights and experiences of implementing decarbonisation
162、 roadmap(s).Shells Energy Transition Hub supplier benchmark is an example of digital platform that offers a supplier benchmark for the company suppliers,and that can be expanded to share best practices and explore decarbonisation behaviours that workfor SMEs.Who Wider collaboration to recognise the
163、support that banks and buyers might seek to help you better progress with clientsBenchmarking organisations,networks,and behavioural science experts to help identify decarbonisation behaviours as well as existing SME engagement platforms,like SME Climate Hub,B Corp,and Supplier Energy Transition Hub
164、,to build out what banks and buyers have started.Lever:Behaviour-basedSolution:Behaviourally-informed roadmap for decarbonisation 21Financial innovation for SME net zero transition:Role of banks and buyersInnovation sprints to devise new types of supportLever:Business Model Shifts for Banks and Buye
165、rsSolution:Marketplace to provide net zero transition services for thematically clustered SMEs,corporates,and banksWhy Context and targeted outcomes for the leverExisting platforms donot createa two-waychannelfor resource sharing andcommunication between SMEs and banks or buyers.They often work in s
166、iloes on net zero commitments,and there is a sender/receiver issue on thematic knowledge and service provision.SMEs can either be overwhelmed with the range of services and tools offered to them through banks and buyers or remain largely uninformed of the latest market offerings.There is a need fort
167、hematic clusteringof SMEs to providebespokeand tailored support given thesize and range of SMEs focus.It is thenatural next step forkey market playersto cometogether and do more tosupport each other in the net zerotransition.It builds on the need for clientsto have a range ofsolutionsavailable throu
168、gh banksandbuyers,openingsustainability support andincreasing competition.Increasing the support and resources available to SMEs will allow SMEs to deepen their knowledge of industries and enable financial strategies for portfolio clusters.How Areas for the banks and buyers to research and prepare f
169、or SME interactionBanks and buyers are recommended to:Identify SME needs to make progress on net zero and develop solutions Assess the utility of a marketplace concept in relation to existing solutions Develop incentives for SMEs to use the marketplace for solutions,particularly those who are less i
170、nterested or cannot be engaged:Increase time commitment Facilitate mandated and/or voluntary engagement Provide a solutions menu and standardised toolsWhat Meaningful actions/research/development that will facilitate this solution for decarbonisation with SMEsA marketplace that provides SMEswith ame
171、nu of solutionsto addresstheir specific emission challenges and access to peergroups tackling similar problems.Via the platform,the peers could also act together to influence the supply chain or getaccess to solutions thatmight not be available on an individual basis.The marketplace can also help br
172、ing an incremental shift in the business model of banks and buyers with regard to their engagement with SME clients.It can help banks and buyers deepentheir ESG-specific industryknowledgeand act as anenabler in developingfinancial strategies fordifferent client clusters.It can also enable banks to e
173、asilyidentifyclientswho wouldrequire support for theirdecarbonisation journey.Timeline:6 months(thematic clustering/aggregation phase),6-12 months(platform development phase),12-18 months(prototyping phase),and 18-36 months(roll out and scale-up phase).22Financial innovation for SME net zero transit
174、ion:Role of banks and buyersInnovation sprints to devise new types of supportLever:Business Model Shifts for Banks and BuyersSolution:Marketplace to provide net zero transition services for thematically clustered SMEs,corporates,and banksWhere to start or continue Resources/examples/initiatives to h
175、elp banks and buyers find new and interesting ways to take this solution forwardAt present,theSME Climate Hubprovides a one-way communication channel for SMEs to access information and resources around net zero transition.It can be expanded to include SMEs,banks,and buyers to access a marketplace of
176、 solutions and service offerings.Who Wider collaboration to recognise the support that banks and buyers might seek to help you better progress with clientsFinancial institution and corporate networks,which can help identify and standardise service offerings and solutions for SMEs,and data regulator(
177、s),which can ensure SMEs have informed and transparent access to listed solutions.23Financial innovation for SME net zero transition:Role of banks and buyersThe potential solutions that emerged from the innovation sprints,co-designed by banks and buyers,and reviewed by SMEs,highlight areas where mor
178、e can be done to better support the SMEs in their transition to net zero.Conclusion and suggested next steps4SMEs who participated in the innovation sprints were critical of the effectiveness of current net zero resources available for their community.They called on banks and buyers to do more in fa
179、cilitating SMEs access to emerging knowledge and services using digital technology and other user-friendly offerings.As a result,the proposed solutions that emerged from the innovation sprints are mutually supportive stemming from the need for a user-friendly platform dedicated to SME net zero actio
180、n and coalescing around the need for a one-stop platform for banks,buyers,and SMEs that provides the space for:1.mutual support in net zero efforts,2.benchmarking,3.data and knowledge exchange about emissions(a marketplace for knowledge and solutions),4.and targeted financial incentives,building on
181、benchmarking.Such a one-stop platform brings together the four proposed solutions that emerged from the innovation sprints,and,theoretically,these solutions have the potential to be incorporated within existing platforms,like the SME Climate Hub.The solutions also steer toward Research&Development(R
182、&D)next steps,detailed in the below Table 8.During this R&D,it would also be critical to map how policy and regulators could support the viability and impact of any eventual solutions.Both banks and buyers,through their commitments,economy-wide exposure,and resources can play a key role in bridging
183、the net zero financing gap.The innovation sprint process can be the first step toward further collaborative R&D that bridges this gap,enabling an inclusive transition to net zero.24Financial innovation for SME net zero transition:Role of banks and buyersConclusion and suggested next stepsTable 8:Nex
184、t steps for each solution area based on innovation sprintsLever of changeProposed solutionNext steps for each solution area Knowledge-basedClimate Readiness classification process based upon market segmentation by stage,size,sector,and location criteria,and co-development of a diagnostic tool to ass
185、ess SMEs Climate Readiness,promoting internal knowledge and action amongst SMEs about net zero,paired with appropriately calibrated transition resources.Develop SME market segmentation criteria to classify stage-,size-,sector-,and location-appropriate information Develop with SMEs a diagnostic tool
186、for SMEs to self-assess their Climate Readiness and classify according to segmentation criteria Identify and develop technical and financial incentives for SMEs to use the readiness tools and resource packages provided by banks and buyers Banks and buyers can support existing platforms in arranging
187、knowledge and resources based on SME net zero transition maturity and sectorsTechnology-basedCentralised,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
188、 to incentivise SME reporting and transition more effectively.Identify the key drivers and stakeholder groups for the traceability of evidence-based data Develop criteria for data confidence and reduce the need for explicit auditing Source data entry points to triangulate data for better scope-based
189、 progress reporting Rapid trial of data incentives and their effectiveness in encouraging SMEs to use existing data repositories for emissions reportingBehaviour-basedSME decarbonisation roadmaps(benchmarks),incentivising opportunities and encouraging behaviour change.Identify the specific behaviour
190、s that SMEs need to achieve decarbonisation Tailor the roadmap provided to decarbonisation behaviours(e.g.,use a carbon calculator,switch to a renewable energy provider,identify providers of recyclable packaging,etc.)Co-identify existing resources,tools,and information that SMEs can use with their c
191、lientele and in their value chains or benefit most from during the roadmap Co-develop a benchmarking methodology with expert stakeholders Business model shifts for banks and buyersA marketplace that provides net zero transition support services for thematically clustered SMEs,corporates,and banks.Id
192、entify SME needs to make progress on net zero and develop solutions Assess the marketplace utility in relation to existing solutions Develop incentives for SMEs to use the marketplace for solutions,particularly those who are less interested or cannot be engaged Undertake a systematic review of exist
193、ing interaction platforms to identify incentives and features for thematic aggregation of solutions,service offerings,and networks of banks,buyers,and SMEs on net zero 25Financial innovation for SME net zero transition:Role of banks and buyersBaringa.(2021)The Financial Services challenge:Achieving
194、Net Zero while funding the real economy.Retrieved from:https:/ Net Zero Supply Chains The Multi-Trillion Dollar Key to Beat Climate Change.Retrieved from:https:/ Trust.(2021)SMEs and energy efficiency.Retrieved from:https:/prod-drupal- to Transformation:A Chain Reaction.CDP Global Supply Chain Repor
195、t 2020.Retrieved from:https:/ scope 3 emissions.Retrieved from:https:/www.cogo.co/post/what-are-scope-3-emissions.FCA(2021).Banking,Climate and Competition.Retrieved from:https:/www.fca.org.uk/insight/banking-climate-and-competition.IPSOS,(2021).British Business Bank Finance Intermediaries Survey.Re
196、trieved from:https:/ Net Zero Without SMEs:Strengthening Policy and Collective Action for SME Greening.Retrieved from:https:/www.ifac.org/knowledge-gateway/contributing-global-economy/discussion/no-net-zero-without-smes-strengthening-policy-and-collective-action-sme-greening.Lloyds Banking Group.Bus
197、iness,(2022).Up to 4 million small businesses have no plans for net zero transition.Retrieved from:https:/ brief:Financing small and medium enterprises to support a just transition to net-zero emissions in the UK.Retrieved from:https:/www.lse.ac.uk/granthaminstitute/wp-content/uploads/2020/07/Financ
198、ing-small-and-medium-enterprises-to-support-a-just-transition-to-net-zero-emissions-in-the-UK.pdf.NatWest.(2022)9 out of 10 SMEs dont know business carbon emissions.Retrieved from:https:/ the Contributions of SMEs in a Global and Digitalised Economy.Meeting of the OECD Council at Ministerial Level.R
199、etrieved from:https:/www.oecd.org/industry/C-MIN-2017-8-EN.pdf.Roland Berger(2021).SME.lending in transition:opportunities to develop future-oriented business models.Retrieved from:https:/ net zero:incentives for supply chain decarbonization.Retrieved from:https:/www.wbcsd.org/download/file/13278.WS
200、P.,(2020).Net Zero:Are SMEs The Missing Link In The Chain?Retrieved from:https:/ innovation for SME net zero transition:Role of banks and buyersAppendix A1.Challenges faced by buyers and banks in supporting the SME net zero transitionIn 2021,the British Business Banks UK Network surveyed 159 busines
201、s finance intermediaries6 to investigate the state of the UK SME finance ecosystem in relation to net zero-related projects.60%of those surveyed felt that the business support ecosystem did not currently help SMEs to understand and identify net zero-related projects.Respondents called out specific i
202、ssues such as a poor referral network,a lack of specialist advisers,and a lack of signposting or information that was easy for SMEs to understand.The table outlines the range of challenges faced by buyers and banks in supporting SMEs in acting towards net zero goals:6 The British Business Bank ident
203、ified finance intermediaries as the support service providers like lawyers,accountants,and small business finance advisors(IPSOS,2021).Table:Challenges faced by buyers and banks in supporting SME net zero transition Challenges faced by buyersChallenges faced by banksThe long tails of supply chains a
204、nd diversity of suppliers make it difficult for buyers to set and prioritise climate KPIs,particularly when sourcing may require adjustments to meet the differentiated needs of their suppliers.This challenge can make such solutions difficult to scale.Solutions for challenges must be viable even for
205、suppliers for which buyers have limited leverage,such as those with relatively low production percentages and smaller contracts.Lack of climate expertise within buyer operations that could support navigating the complex tools and frameworks,such as the Science Based Target Initiative(SBTi),Climate D
206、isclosure Project(CDP),and others.Incompatibility of sustainability solutions with existing buying processes,which leads to difficulty in creating universal requirements that can be used by any buyer and its suppliers.To ensure that solutions can be applied universally,supporting education and train
207、ing on climate for suppliers will be an important element.Demonstrating impact/additionality of climate finance given to SMEs,i.e.,whether the product or service the bank has provided has led to behaviour on the part of the financed company that would not have happened without that product or servic
208、e.This is often reflected in the“data gap”banks face,as many SMEs face challenges measuring and collecting data.Supporting SMEs in their net zero transition when the margin to service these clients makes it more difficult to justify the investment in that support.The variety of financial solutions d
209、edicated to climate/sustainability objectives remains limited for SMEs.There is a need for collaborative R&D to help overcome obstacles and drive efficiencies across the SME finance space so that SMEs receive the help they need to stay competitive and build resilience.Besides these challenges,buyers
210、,and banksparticularly those that are leading in climate actionunderstand the importance of their role in supporting SMEs to make the climate transition.The next section will highlight the approach undertaken to deal with the big problem of how banks and buyers can demonstrate the power and potentia
211、l of collaboration through innovative technical and financial incentives/solutions for SMEs net zero transition.This can help them leverage their access and relationships to SMEs and businesses along the supply chains and clientele.27Financial innovation for SME net zero transition:Role of banks and
212、 buyersAppendix A2.Details of scope 1-3Figure:B2B pressure on targeting scope wise emissions(Cogo,2022)3.Further information about innovation sprintsThe innovation sprints formed phase two of a partnership that began in 2021.In phase one,CISL and BSR focused on identifying barriers to SME climate ac
213、tion.Our research showed a clear need for financial innovation.Furthermore,in phase one,CISL and BSR explored the current landscape of solutions and developed an interactive,online resource for SMEs with information about:Where and how SMEs can obtain financial support for reducing emissions Guidanc
214、e for SMEs on engaging with banks and buyers about such financial support Examples of available sources of funding,including success stories This project was a part of the SME Climate Hub,a global community and online resource platform for SMEs looking to transition to net zero.The SME Climate Hub i
215、s led by the We Mean Business Coalition and aims to support over one million SMEs globally to halve greenhouse gas emissions before 2030 and achieve net zero emissions before 2050.It features a commitment recognised by the UN Race to Zero and a set of freely available resources including educational
216、 courses(Climate Fit),guidance on business strategies and financial support,and tools for measuring and reporting emissions.Collaborating organisations include the CDP,Ceres,International Chamber of Commerce(ICC),Intuit,Google,UN Race to Zero,United Nations Global Compact and the 1.5C Supply Chain L
217、eaders group,among others.28Financial innovation for SME net zero transition:Role of banks and buyersFeedback on solutions identified during the sprints consisted of evaluating whether:The solution supports SMEs andaddressesone or morebarriersto decarbonisation identified during phase one(i.e.,Capac
218、ity,Buy-in,Finance,and Time)The solution pragmatically focuses on how to do so(solutions-focus).The solution clearly defineswho does what(roles&responsibilities,including partnerships).The solution can be implemented in theshort-term(e.g.,milestones at 6/12 months).The solution focuses on whatpartic
219、ipants(individually or jointly)can implement.The solution innovatesthestatus quoat scale(e.g.,can result in change of practices by thousands of SMEs).These solutions were then stress-tested via interviews with selected SMEs conducted between July and September 2022.The interviews took place in the p
220、eriod of July to September 2022.The six SMEs interviewed were selected to represent different levels of advancement in their climate journey,geographies,and sectors.During these interviews,CISL and BSR investigated how effective the solutions proposed during the innovation sprints were in addressing
221、 key existing challenges to SMEs decarbonisation.Appendix AHead office The Entopia Building 1 Regent St,Cambridge CB2 1GG,UK T:+44(0)1223 768850 infocisl.cam.ac.uk Brussels The Pericls Building Rue de la Science 23 B-1040 Brussels,Belgium T:+32(0)2 894 93 19 info.eucisl.cam.ac.uk Cape Town PO Box 313 Cape Town 8000 South Africa T:+44(0)1223 768850 infocisl.cam.ac.uk www.cisl.cam.ac.uk cisl_cambridge