Is a sustainability-driven SME more resilient?

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.