Small Firms Face Green Finance Gap Despite Demand
Applications have risen more than 65% since 2023, but most small businesses that explore green funding never apply.
Updated on Nov. 3, 2026 in Environmental
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Sage and the International Chamber of Commerce published research finding that small and medium-sized enterprises face a green finance funding gap, even as applications to access green finance have risen more than 65% since 2023. The research is a published analysis rather than a shipped product or policy, and the share of SMEs actually receiving funding has not changed.
Why it matters
Small and medium-sized enterprises account for more than 63% of enterprise emissions in the EU, so their ability to finance cleaner equipment shapes whether climate targets are met. The findings suggest the bottleneck is not demand for funding but the process of getting it, as banks struggle to justify the cost of assessing smaller loans.
The research is a survey-and-analysis study rather than a technology benchmark, with the central measures being application growth and funding-uptake rates. Applications rose more than 65% since 2023 while the share of SMEs receiving funding did not change, indicating the conversion step from application to funding is where the gap sits.
The players
Sage
A business software company whose accounting and finance platforms serve small and medium-sized enterprises, and which co-published the research.
International Chamber of Commerce
A global business organization that sets trade and commercial standards and co-published the research on SME green finance.
NatWest
A major UK bank whose tracker of SME sustainability priorities supplied the 2026 finding that only 30% of SMEs prioritized sustainability.
The details
The gap arises at the point where a business asks a lender for green finance: SMEs that explored applications cited complicated processes and repeated requests for ESG information, which is the environmental, social and governance data lenders use to assess sustainability risk. Banks struggle to justify the cost of assessing smaller loans, so the paperwork and review effort are large relative to the loan size. The result is that many firms start an application and stop, with 80% of SMEs that explored green finance choosing not to apply.
Timeline
2023: baseline year against which the more than 65% rise in green finance applications is measured.
2024: global climate finance exceeded $2 trillion.
Past five years: SMEs improved their sustainability performance by 20%.
Past 12 months: 45% of SMEs increased their sustainability efforts.
2026: only 30% of SMEs prioritized sustainability, according to the NatWest tracker.
The Tech Race
This research sits within the wider effort to channel climate finance to smaller firms, which global climate finance exceeding $2 trillion in 2024 has not yet reached in proportion to emissions. The finding that SMEs drive more than 63% of EU enterprise emissions places the funding bottleneck at the center of the decarbonization race.
For a small business owner, the practical barrier is the application process itself, since requests for repeated ESG information and the time they take can end an attempt before funding is reached. The extraction does not give timelines for when lenders will simplify these processes, so changes to access remain unannounced.
The takeaway
The key trajectory is that funding access, not appetite for green investment, is now the constraint on SME decarbonization. Watch whether lenders reduce ESG documentation requests and whether the share of SMEs receiving green finance moves off its current flat line in future tracker releases.
Further reading
For broader context on how climate and emissions policy shapes business decisions, browse the Environmental section.
Source note: This article includes information reported by Edie.
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