PSF publishes report on streamlining sustainable finance for SMEs and developing an SME reporting framework

Streamlining sustainable finance for SMEs

The PSF begins by observing that, although SMEs account for more than 50% of the GDP of the European Union and more than 63% of European companies’ greenhouse gas emissions, they face many challenges in accessing external financing for their transition efforts and must often finance transition themselves.

To help SMEs access external financing more easily, the PSF is proposing a reporting framework designed especially for SMEs and tailored to their capabilities. The “SME sustainable finance standard” is based in part on the European Taxonomy, which is becoming increasingly the norm for classifying green finance in the European Union.

Under the standard proposed by the PSF, SMEs would have the option of reporting at three levels:

• at the level of activities: those activities that are included in the Taxonomy Climate Delegated Act and that meet certain criteria (see below) allowing them to be classified as sustainable. In addition, other activities that are not listed in the Taxonomy but that meet criteria set out by the PSF could also be classified as sustainable;
• at the entity level: SMEs that have implemented certain practices or actions that pursue the transition to a sustainable economy, as well as SMEs that hold a climate-related certificate, can be classified as sustainable under the standard proposed by the PSF;
• at the level of investments: some investments made by SMEs could be classified as sustainable under the standard proposed by the PSF. These could be investments to improve energy efficiency, decarbonise or electrify appliances or equipment.

As the technical screening criteria in the European Taxonomy can prove very complex for SMEs, the PSF is proposing a range of simplifications for the SME standard, which would allow SMEs to report Taxonomy-listed activities as sustainable. For example, these simplifications include:

• grouping together similar activities listed in the Climate Delegated Act;
• clarifying references to other EU legislations;
• clarifying certain requirements in the technical screening criteria that require the use of judgement.

As SMEs would be assessing their compliance with criteria that differ from those set out in the Climate Delegated Act, the proposed PSF standard would not permit them to qualify themselves or their activities as Taxonomy-aligned.

In order to ensure adherence to minimum social and environmental safeguards, SMEs reporting under the proposed PSF standard would be required to respect the applicable legislative framework, and could not finance or operate in sectors excluded from the EU Paris-Aligned Benchmark. PMEs would also be required to publish sustainability indicator of the simplified voluntary reporting standard for SMEs that the Commission is expected to develop as part of the first “Omnibus” package, which will be based on the Voluntary Reporting Standard for SMEs (VSME) published by EFRAG in December 2024.

The PSF is proposing that general-purpose finance should be classified as sustainable under the SME sustainable finance standard if it is financing:

• an SME whose main activity is included in the list of sustainable activities as defined in the standard;
• an SME that can demonstrate that it qualifies as sustainable at the entity level, according to criteria set out in the standard.

For known use of proceeds finance, the investments should be classified as sustainable if they are financing:

• investments related to an activity included in the list of sustainable activities as defined in the standard;
• investments that meet the investment-level criteria set out in the standard.

The PSF also recommends developing an online tool to allow SMEs to assess whether the activities or investments they are seeking to finance can be classified as sustainable.

Although the report published by the PSF was drafted before the EC published the first Omnibus proposals on 26 February this year, the PSF recommends that the criteria relating to its proposed sustainable finance standard should be included in the voluntary reporting framework that is to be developed based on the VSME.

It should be noted that the PSF had already recommended improving SMEs’ access to sustainable finance in its reporting “Simplifying the EU Taxonomy to Foster Sustainable Finance”, published in February 2025 (available here).