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4most Wins Government Funding to Develop Green Lending Proposition for SMEs
Global Banking & Finance Review®
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UK’s largest credit risk firm partners with Meckon and Swishfund to deliver cheaper finance to greener SMEs via environmentally responsible ‘Green Credit Score’
20 June 2022, London – The UK’s largest independent credit risk and actuarial consultancy, 4most, has won a competitive, SBRI government funded award from Innovate UK, to build a UK-wide green lending proposition. The statistically developed ‘Green Credit Score’ aims to boost climate action, while delivering cheaper finance to greener SMEs by using environmental responsibility as a key indicator of credit worthiness.
The Green Credit Score is being jointly developed by 4most, as well as boutique cleantech advisory firm Meckon, and international fintech lender, Swishfund. 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 all lending institutions 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 inform SMEs of 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.”
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A Green Credit Score is a financial assessment tool that evaluates the environmental responsibility of small and medium-sized enterprises (SMEs) to determine their creditworthiness.
SMEs, or small and medium-sized enterprises, are businesses whose personnel numbers fall below certain limits, typically characterized by a smaller scale of operations compared to larger corporations.
Climate change refers to significant and lasting changes in the Earth's climate, primarily due to human activities, which can impact weather patterns, sea levels, and ecosystems.
Sustainable finance refers to financial practices that consider environmental, social, and governance (ESG) factors in investment decisions, aiming to promote sustainable economic growth.
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