PROJECT DESCRIPTION
BACKGROUND
Small and medium-sized enterprises (SMEs) are the backbone of the European economy and have a significant climate impact. Yet, climate considerations have scarcely been integrated into SMEs financing decisions. This is due to a lack of data and information on how SMEs can be affected by climate change and which actions they should take to manage negative impacts of climate change.
OBJECTIVES
The LIFE CB-PASTAX project was designed to support the implementation of the EU sustainable finance action plan and the Paris Agreement commitment related to Art. 2.1c ("Aligning Financial Flows with Climate Goals"). As general objectives, it sought to
- support European banks in developing and implementing climate related financial products targeting European SMEs;
- improve the ability to identify and manage climate transition risk assessments for European banks across SME lending portfolios;
- use the financial sector as a lever more broadly to drive the integration of climate issues across SMEs;
- support the adoption of the EU taxonomy in reporting and management decisions across European SMEs;
- improve the quality and scale of climate disclosures by financial institutions.
RESULTS
Although several of its objectives were overachieved, the project did not fully achieve all of its expected results. The project demonstrated that climate change risk analysis at the SMEs level is both feasible and of significant interest to public and private banks. The approach they implemented—building an SMEs database that matches companies and products with an algorithmic tool to identify different types of climate-related risk —is an innovation in the financial sector. This type of financial risk analysis at the individual SME level is innovative for both the financial market and the SMEs themselves.
The project managed to create a database of over 200 000 SMEs from five member states, significantly exceeding the 100 000 SMEs initially foreseen in the GA. However, the application in the project showed that this number is still not sufficient to make the PASTAX web tool suitable for daily use by private banks in their lending business. Therefore, the target of influencing 500 credit decisions was not reached. Nonetheless, with a group of six private banks from three EU markets that have road-tested the PASTAX tools and have committed to continue their collaboration with the project, this objective is likely to be achieved in the near future. As the basic methodology has been proven to be effective, the main issue for further development is to secure sufficient resources to cover all SMEs in one or more Member States in order to meet the expectations of the banks.
The project already secured significant third-party support to continue the development and deployment of the PASTAX webtool in accordance with the objectives formulated in the GA. It is expected that additional banks will apply the project’s tools in the medium term, especially as Deloitte NL committed substantial in-kind support to extend the SMEs database.
In addition, the project has secured significant support from other public interest organisations, ensuring that the PASTAX methodology and underlying database will continue to be developed beyond the project period, and key project staff are developing the tool into a market-ready product by 2026. This indicates that the project's objectives and quantitative targets will continue to be pursued in the coming years.
