Integrating Finance and Technical Support: An OECD Blueprint for Scaling SME Green Investment
SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation and Infrastructure | SDG 13: Climate Action
Institutions: Ministry of MSMEs | Ministry of Finance | Ministry of Environment, Forest and Climate Change
The OECD report, Scaling Up Public Financial and Non-Financial Support for SME Sustainability: Innovations and Good Practices , highlights the pivotal role of Small and Medium-sized Enterprises (SMEs) in driving the global green transition. Globally, SMEs represent over 90% of all businesses and account for about 50% of global business sector GHG emissions. Their engagement is indispensable for achieving sustainability targets. The report segments SMEs into three groups—Innovators, Enablers, and Adopters—each facing different but persistent challenges.
Common barriers for SMEs include limited access to finance (cited as a key barrier by 41% of SMEs globally) , high upfront costs , and skills/expertise gaps. Innovators, for example, struggle to secure patient, high-risk capital for R&D, while Adopters require affordable credit and technical support to integrate green solutions.
The core finding is that financial support alone is often insufficient. Effective public interventions must integrate financial instruments (e.g., green guarantees, concessional loans, equity) with non-financial support (e.g., advisory services, audits, simplified procedures to reduce knowledge gaps, mitigate high perceived risks, and ensure scalability.
Policy Relevance and Strategic Path Forward
The report, drawing on 21 in-depth case studies from a range of OECD and non-OECD economies, provides an evidence-based roadmap for policy design that goes beyond merely supplying capital. The report explicitly acts as a blueprint for institutional reform and program design, demonstrating that public intervention must strategically act as a risk mitigant and capacity builder, not just a direct lender.
The strategic path forward focuses on three interlocking pillars to effectively close the SME financing gap and accelerate the green transition:
1. Targeting Market Gaps and Mobilising Private Capital
Effective programmes must target specific market gaps such as the high perceived risks, long payback periods, and information asymmetries that deter private finance. The public sector’s most powerful intervention is to design risk-sharing mechanisms like blended finance, capped portfolio guarantees, and concessional terms.
2. Strengthening SME Capacity and Ecosystem Support
Financial support alone is frequently insufficient; therefore, it must be paired with non-financial support to address critical capacity and knowledge gaps. The policy mandate is to provide subsidised and targeted technical assistance (e.g., energy audits, advisory services, reporting guidance) to lower entry barriers and strengthen project quality and long-term viability. Furthermore, selecting the right intermediaries and partners is crucial for efficient delivery, ensuring that financing and non-financial support are delivered transparently and at scale.
3. Streamlining Processes and Fostering Standards
To ensure wide accessibility without compromising integrity, programs must reduce the compliance burden on SMEs. This is achieved by leveraging digital tools (like online eligibility checkers and carbon calculators) to streamline application and monitoring. Additionally, the public sector should promote standardised reporting templates (e.g., Malaysia’s Simplified ESG Disclosure Guide) and align criteria with recognised taxonomies to improve data comparability for lenders and mainstream sustainable lending practices within the wider financial ecosystem.
Follow the full report here: Scaling Up Public Financial and Non-Financial Support for SME Sustainability: Innovations and Good Practices