New environmentally responsible ‘Green Credit Score’ launched to deliver cheaper finance to greener SMEs

A new ‘Green Credit Score’ is being launched to deliver cheaper finance to environmentally responsible SMEs across the UK. The green lending solution is being developed by the UK’s largest credit risk consultancy, 4most, who has won an SBRI government funded award from Innovate UK, to roll out its eco-driven proposition to businesses nationwide, working in partnership with cleantech advisory firm Meckon, and international fintech lender, Swishfund. The ‘Green Credit Score’ will seek to boost climate action, while delivering cheaper finance to greener SMEs by using environmental responsibility as a key indicator of credit worthiness.

As well as providing significant benefits to borrowers, the proposition will essentially put money back into the pockets of SMEs that take steps to reduce their environmental impact. The project itself will deliver a comprehensive data set, credit risk analysis and scorecard, which 4most will make available to lenders across the UK, including credit reference agencies and credit auto-decision-making platforms. 

Climate change represents a material but hidden risk to many small businesses today, yet these organisations are critical to achieving the UK's carbon targets. A recent British Business Bank survey highlighted that 50% of UK business emissions come from the SME sector. Despite this, only 3% of smaller businesses have measured their carbon footprint in the past five years*.

The Green Credit Score will help SMEs to identify their current carbon impact, advise them of key risks to their business in the transition to a low carbon economy, and will provide them with the tools to help mitigate those risks, while reducing direct and indirect carbon emissions.

Ivelina Nilsson, Client Partner and Head of Climate Change at 4most said: “This project will build a virtuous circle of measuring carbon footprints, providing risk-based funding and boosting climate action. To develop the Green Credit Score, we plan to gather data from potential borrowers to estimate the various aspects of climate change risk that they are exposed to.”

Sacha Meckler, Founding Director of Meckon, also commented on the importance of the project, “Great strides have been made over recent years in assessing the climate risk and impact exposures of large corporates, and we look forward to working with 4most and Swishfund to bring these innovations to SME businesses.”

Andrew Jackson, Managing Director at Swishfund added, “We believe that companies that act sustainably are more likely to be financially responsible, but changing business culture around becoming greener is not just about providing information, it has to make commercial sense to business owners. This is why we are seeking a correlation between environmental responsibility and credit worthiness across the board, so that every finance provider will be encouraged to provide cheaper finance solutions to more responsible businesses. It’s now a question of pulling enough data together to create positive change around the way the risk industry currently thinks.”