How can Covid-19-influenced CMU initiatives help diversify SME access to finance while promoting a greener economy?

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SMEs will play a key role in the green transition, especially in improving the energy efficiency of housing. Innovative financing models in this sector would contribute towards achieving the ‘Fit for 55’ goals, as well as support the business environment of the SMEs that will implement a myriad of small energy improvement projects.

The CMU could, for instance, support SMEs to contribute to net zero emissions by 2050. SMEs dominate the residential construction sector, accounting for over 60 % of employment in the sector. We therefore find that, rather than attempting to ‘green’ SMEs themselves, one should concentrate on the contribution SMEs could make to greening the economy. They would do this by helping to reduce households’ emissions due to heating and cooling, which contribute considerably to overall emissions.

SMEs in the residential construction sector emit only about 27 million tons of CO2 equivalent in greenhouse gases (GHG, per annum), compared to the close to 300 million tons needed by households for heating (and cooling). The GHG emissions reductions will require several different approaches: insulation, PV on roofs or the installation of heat pumps. These activities tend to be performed by SMEs which depend on bank credit for their external financing. Larger and more cross-border innovative financing schemes can help SMEs perform these activities, thus fostering the green transition and reducing fossil fuel reliance from third countries. The innovative financing can be based on past successful H2020 projects and take the form of energy performance contracting, crowdfunding, green bonds, on-tax financing, etc.

Finally, this study also argues that personal guarantees should be considered. Personal guarantees represent an often-neglected obstacle because they limit micro enterprises’ access to capital, as well as their capacity to take risks.


This study was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the Committee on Economic and Monetary Affairs (ECON Committee).

Authors: Daniel Gros, Willem Pieter De Groen, Damir Gojsic, Apostolos Thomadakis, Mathieu Vuylsteke.