Developing London’s SME Green Business Transition: Finance and Support Services

The 2023 London Low Carbon Market report indicates that the green economy is valued at £50 billion, accounting for 5% of total employment.
From 2023-2025, London Councils’ Green Economy Programme was established to support the delivery of their wider Climate Programme by mobilising skills, supply chains and investment needed for a Just Transition. SMEs play a crucial role in this transition and supporting them to adopt sustainability practices is of utmost importance in realising this goal.
The objective of this report is to assess the availability and effectiveness of financial support, business services, and green technology adoption for SMEs transitioning to a green economy. London’s SME business support ecosystem consists of local councils, chambers of commerce, financial institutions, and private business support providers. To gain a holistic understanding, a total of 31 qualitative in-depth interviews were conducted with a range of key stakeholders within the wider ecosystem. The discussions focused on current green finance and funding schemes, associated challenges, best practices and key priorities.
Key Findings
Our findings show that most green transition programmes for London’s SMEs are small-scale, localised, and unevenly delivered, with only a few large-scale public and private initiatives available. Overall, the existing support services can be categorised into four main areas: i) networking and knowledge transfer, ii) energy audits and distribution of energy-saving devices, access to external financing including green grants, match funding, and finance, as well as iii) support for supply chain collaboration and iv) green infrastructure development.
While public and private initiatives, such as Sutton Council’s Green Business Rate rebate and the South London Partnership’s retrofit skills centre, provide effective models for SME support that require scaling, broader financial and knowledge barriers persist. For instance, equity investment for green innovation exists but remains limited to a small number of high-growth ventures. SMEs that receive grants or advisory support are more likely to adopt sustainability practices, highlighting the need for more comprehensive and accessible assistance.
Key Challenges
SMEs face significant barriers in their green transition efforts, primarily due to limited access to finance, with many struggling to secure funding due to a lack of awareness of existing opportunities, often complex application processes, and small-scale grants that fail to incentivise green investment.
Tenant-landlord constraints further hinder progress, as most SMEs operate as tenants, restricting their ability to invest in retrofitting the existing infrastructure
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and drive renewable energy solutions. Additionally, SME support services across London are bureaucratic and fragmented, making it difficult for businesses to navigate available opportunities. Progress is further hindered due to a shortage of green skills, particularly in energy audits and retrofit projects.
Recommendations
Drawing on empirical insights from our research, findings point to a number of recommendations that can tackle the key challenges:
1. Establish a London-Wide SME Green Support Programme - Create a centralised, ‘one-stop shop’ model with a focus on long-term, less bureaucratic support mechanisms with simplified grant processes and advisory services. Embed sustainability expertise within existing SME support so that green practices are introduced as part of standard business advice, not only for those actively seeking it as a complementary approach. This agnostic approach —whether driven by cost savings or climate goals—broadens engagement and ensures sustainability makes economic sense for all businesses.
2. Boost and Streamline Access to Green Finance – Simplify application processes and improve outreach to SMEs to ensure financial support is more accessible. Bridge the financial gap by introducing targeted subsidies and incentives to alleviate high upfront costs of green investments. Here, third party green loans and support programmes offered by High Street banks and other private sector lenders will need to help reduce the impact that reduced public grants are causing.
3. Develop Shared Green Infrastructure and Landlord-Tenant Solutions - Enable SMEs to access shared spaces and testbeds to pilot green innovations. Incentivise landlord-tenant collaboration for energy-efficient retrofits and regulatory compliance through co-created programmes and investment schemes.
4. Expand Green Skills Training – Address the skills gap in retrofitting and renewable energy installation to meet rising demand and focus on inclusivity to address gaps that can also help to drive the Just Transition.
5. Strengthen Public-Private Partnerships and Enhance Green Procurement and Supply Chain Integration - Encourage collaboration between councils, finance providers, and businesses to scale sustainability solutions. Promote SME involvement in public and private green procurement through targeted matchmaking, clearer guidance on sustainability requirements, and facilitated entry into supply chains.
6. Enhance Regulatory Clarity and Support – While businesses do not call for fewer regulations, clearer and better-aligned regulations, alongside improved support services, can drive sustainability adoption.
7. Redefine Success Metrics – Move beyond traditional impact measures to track long-term environmental benefits and business resilience.