We have all heard about the urgency of shifting towards more sustainable business practices. Though large, mainly listed, companies have been under the scrutiny of regulators, customers, and media, a society cannot make the sustainability transition without the active involvement of SMEs. Today, SMEs in Europe count for more than 60% of value-added.
However, ESG (Environmental, Social, and corporate Governance) transformation might be expensive, uncertain, and has a long-term nature. Hence, it is important for SMEs to understand that ESG practices not only benefit society but their resilience as well.
A new study by the Centre for Sustainable Finance – which was conducted by Professor David Veredas and doctoral researcher Dimitrios Kolokas, with the support of partner ABN Amro Belgium – sheds light on the impact of ESG performance on the credit risk of 350 Belgian SMEs. The study shows that – on average – investing in sustainability pays off as SMEs become more credit-worthy. In addition, the decrease of credit risk due to an increase of the least resilient SMEs’ ESG performance is also dependent on their liquidity.