Banks are navigating a tricky challenge when it comes to financed emissions reporting: how to accurately account for the carbon footprint of their corporate clients, especially small and medium-sized enterprises (SMEs).
The current answer, for most, has been proxies. Industry averages, rough estimates and annual reports. It’s better than nothing but far from ideal.
In a world demanding greater transparency, real-time insights, and stronger ESG disclosures, this approach no longer holds up. For banks aiming to improve the quality of their financed emissions reporting, it’s time for a more precise, data-driven path forward. Using transaction-based data to calculate financed emissions with far more accuracy.
Curious how this works in practice? Explore our solution here.
The problem with financed emissions reporting for SMEs
SMEs make up the backbone of many bank portfolios. Yet they’re also the hardest to assess from a reporting perspective. Most don’t have the resources for detailed carbon accounting. And banks? They’re left with an ESG report that’s high on estimation, and low on precision.
This creates problems on several fronts:
- It weakens the quality of financed emissions disclosures.
- It limits the bank’s ability to measure actual progress.
- It blurs the view of ESG-related risk across SME portfolios.
- And it misses an opportunity to support SMEs on their sustainability journeys.
How SME transactions unlock better emissions data
Instead of relying on industry benchmarks and periodic surveys, a new approach is emerging: transaction-based financed emissions data. By analyzing the actual purchases and spending behavior of SME clients, via card and account transactions, banks can gain a far more accurate understanding of their financed emissions.
This method offers many advantages:
- Continuous reporting instead of once-a-year updates
- Automated data collection with minimal input from SMEs
- Client-level insights that allow for better risk management
- Improved alignment with evolving regulations like the CSRD and EFRAG’s VSME guidance
Why now is the moment to rethink financed emissions
Regulators and stakeholders are raising the bar. Financed emissions are becoming a core component of ESG disclosures, and expectations around transparency are only increasing. Climate-related financial risk is no longer a future concern. It’s a current one.
Having access to real, transaction-level emissions data allows banks to:
- Improve the quality and credibility of their ESG reporting
- Track financed emissions over time
- Identify areas of high exposure or opportunity
- Help clients take actionable steps toward decarbonization
And for SMEs, it means being part of the solution without taking on extra administrative burdens.
From rough estimates to real impact
This isn’t just a technical upgrade. It’s a mindset shift from estimating emissions to understanding them. And from checking compliance boxes to actively driving climate action through finance.
By making the invisible visible, transaction-based emissions data empowers both banks and SMEs to move from vague commitments to measurable change.
The question now isn’t if the industry will adopt this approach, but how quickly. Because when real data becomes available, so do real results.
Want to see how transaction-level emissions data works in practice?
Explore our Financed Emissions Platform (SME) or get in touch with our team to learn more.
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