Harnessing SME Innovation and Tackling Climate Change: Why Regional Finance Matters

Short summary of a green finance conference, co-hosted with the Birmingham City Business School and ISBE on 27 September, looking at support mechanisms for SME innovations geared at tackling climate change.

As part of a series of events, CUSP and ISBE recently partnered with Birmingham City University to deliver a cutting-edge research conference, examining the financing of green innovative SMEs from the regional perspective, with a focus on Birmingham City and the West Midlands region. Over 60 policymakers, practitioners, enterprises and academics attended, including presentations by Birmingham City Council, Midlands Energy Hub, Lombard Commercial and Private Banking, Footsteps Faith and leading SME finance researchers.

The conference highlighted the need to support SME innovation to tackle climate emergency. Birmingham is one of the first UK cities to declare a City Centre clean air zone by 2020.  Delivering such a rapid transition has massive repercussions for SMEs and requires not only financial support, but also a comprehensive planning strategy to enable change.

The conference presentations and debate sought to address this from an SME financing perspective, with several key themes emerging:

1. SMEs are a vital and dynamic part of the regional economy and can be a major force for climate change, but this will only work if policies provide a just transition that engages them and addresses their lack of resources.
2. Local and regional finance, whilst possessing local knowledge and connections, is often small-scale and insufficiently structured to supply the needs of key SMEs, including early stage innovators that could provide key climate change solutions.
3. Green enterprise clean-tech definitions and performance metrics remain sketchy. The market is evolving fast and it is evident that policy has to examine more closely the circular economy value of investments.
4. The relationships between energy efficiency (production and use), transport and climate impacts need to be carefully balanced in climate change strategies.
5. Green New Deals which provide overarching strategies and properly cost externalities could demonstrate justification for public spending and need for more cohesive policy approaches which will seek to balance regional inequalities with national resources.
6. Financial and professional intermediaries, including academic researchers have a key role to play in enhancing cross border, local, regional, national and international policy and service linkages to support an effective green finance ecosystem for SME green innovation.

In summary, to achieve the rapid transition required, clear strategic policy needs to be in place at local, regional and national levels – alongside international engagement – that addresses the considerable financing and support needs of green SMEs and prioritises the financing of green circular economy businesses and greening of all SMEs, marking a major shift from the current market-led, for profit Anthropocene disaster paradigm.