The annual “Conference of Parties” climate talks often focus on the big fish: governments, development finance institutions and deep-pocketed investors that can channel capital to big projects. They may do well to consider the minnows — small and mid-sized businesses in emerging markets that are at the forefront of climate innovation and impact.
Such “SMEs” generate more than half of global GDP and form the backbone of emerging market economies, yet they are often left out of the conversation about transition to a low-carbon economy.
With COP30 in Brazil just four months away, some leaders see an opportunity to lift up the role of Global South SMEs in combatting global warming.
“This is a direct call to elevate Small and Medium Enterprises (SMEs) from the sidelines of climate finance to the core of the COP30 agenda, both in the negotiation rooms and across the Action Agenda, to highlight a real opportunity for impact,” writes the Global Climate Finance Forum, a group of investors, policy makers and philanthropists in a letter to the COP30 presidency.
In emerging markets, many small businesses struggle to access capital due to real and perceived risks, including currency fluctuations, that are often beyond their control. “By advancing a mandate for SME finance, the COP30 Presidency can help transform and steer climate finance from the top down and from the ground up.”
GCFF lays out three ways to do that, from mobilizing SME finance via the COP30 action agenda to working to shift the narrative around Global South SMEs.
Embedding SME finance in the COP30 agenda of mobilizing $1.3 trillion
GCFF calls for a clear commitment to track and increase the volume of climate finance to SMEs in low and middle-income countries. “This should include identifying SME-aligned delivery vehicles and prioritising blended finance, catalytic capital, and guarantee structures that unlock early-stage and locally embedded innovation,” the group writes. That should include instruments tailored to the needs of small businesses such as results-based finance, revenue-backed contracts, portfolio guarantees, and regional blended finance platforms.
Also needed: a performance indicator to track the share of climate finance flowing to SMEs.
Strengthen local financial ecosystems
Small businesses are often supported by local financiers, from banks and credit unions to impact investors, asset managers, cooperatives, and community-managed funds. These institutions, notes GCFF, “are better positioned to understand SME realities and align finance with regional contexts.”
It suggests a dedicated SME climate solutions forum in Belém to showcase investable, high-impact enterprises from across the Global South.
Use the narrative power of the COP to shift perceptions on risk and scale
Small and mid-sized businesses, especially in the Global South, are often seen as high-risk and low-return, however ”the risk is not uniform and it is often overstated,” says GCFF. For example, an analysis of 15,000 emerging market credit transactions from the Global Emerging Markets, or GEMs, database found that in 40 years of lending, the average default rate for non-investment grade borrowers in emerging markets was just 3.6%.
“There is no shortage of investable models. What remains in short supply is storytelling that reflects their viability, track record, and systemic relevance,” the letter reads. “COP30 can help shift this narrative.”
