How ESG helps Portuguese SMEs access better financing

Banks are asking for ESG data for credit and green lending lines. Find out how to prepare your company to respond to these opportunities and make the most of them.

Your bank has asked for ESG data. Now what?

If this sounds familiar, it's no coincidence. Over the past two years, asking for ESG data has become routine for banks and other financial institutions, and everything suggests the demand will only grow. What not long ago seemed like something for large companies has reached SMEs, across all sectors.

The good news is that responding well to this request is worth more than ticking a box. Companies that present structured, credible data are in a position to negotiate better credit terms, access green lending lines and earn the lender's trust.

Below we explain why, and above all what to do from here.

Why have banks started asking for ESG data?

In short: European regulation obliged them to.

Portuguese banks, like other European banks, are subject to the SFDR (Sustainable Finance Disclosure Regulation) and to the EBA (European Banking Authority) guidelines on ESG risk. In practice, this requires them to assess the environmental, social and governance exposure of their entire loan portfolio. And that is only possible with data that comes from their own client companies.

Specifically, when a bank assesses a credit application it no longer looks only at the balance sheet and the debt ratio. It also looks at the company's ESG risks. An SME with no information in this area is, for the bank, an unknown. And unknowns are expensive: they translate into higher spreads or, in the most extreme cases, a refusal of credit.

This is not a passing fad. It is a structural change in how risk is assessed across the entire European financial system.

What exactly are banks assessing?

Requests vary from bank to bank and depending on the type of financing, but there is a core set of information that appears almost every time:

Environmental dimension (E)

Energy consumption and energy source
Greenhouse gas emissions (at least Scope 1 and 2)
Waste and water management
Exposure to climate risks

Social dimension (S)

Working conditions and safety
Employee turnover and training
Supply chain practices
Impact on the local community

Governance dimension (G)

Management and oversight structure
Anti-corruption policies and business ethics
Transparency in communication with stakeholders

Most Portuguese SMEs already have concrete practices in all three areas. What is missing is not action but organisation: gathering and recording that information in a way the bank can read. What's missing is structure, not substance.

Access to green credit lines: a real opportunity

Green credit lines in Portugal have grown significantly, both through commercial banks and through programmes backed by the European Investment Bank (EIB) and Portugal 2030.

To access these lines, companies generally have to show that the investment serves environmental or energy-transition purposes. In many cases, the company itself is also expected to have a minimum ESG profile.

Some of the most common terms

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Lower interest rates (reduced spread) for companies with a positive ESG assessment

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Higher financing amounts for projects with a documented sustainability component

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Longer repayment terms linked to energy-efficiency or emissions-reduction investments

An industrial SME that documents a reduction in its energy consumption, or a shift to renewable sources, isn't just doing right by the environment: it is building a concrete financial case to take to the bank.

ESG is also a negotiating tool, not just compliance

It's worth changing perspective on this.

Most CFOs see ESG as a compliance cost: one more thing to manage, one more report to produce. It's an understandable view, but it leaves money on the table.

Companies that treat ESG as management information, rather than a bureaucratic obligation, are in a better position on three fronts:

Negotiating lower spreads.

Some banks already apply price differentials based on ESG criteria, and those with structured, verifiable data come to the table with arguments.

Accessing specific programmes.

Lines such as Eco.nomia, EIB programmes or Portugal 2030 instruments have explicit ESG criteria. Without data, there is no application.

Reducing perceived risk.

A bank that can properly assess a company's ESG profile deals with less uncertainty. And less uncertainty usually translates into better terms.

What to do now: 3 concrete steps

If your bank has already asked for ESG data, or you think it will soon, there are three immediate actions that make a difference:

Step 1: take stock of what you already have

Most SMEs already have ESG practices in place: a waste policy, monitored energy consumption, employee training, a code of conduct. The first step is to map what already exists, even if it isn't yet formalised. Often the work is already done. It just needs to be recorded. See our guide: ESG diagnostic: how to identify what your company already does.

Step 2: structure the information around the E, S and G dimensions

A bank doesn't want a narrative. It wants data. Organise the information systematically, with reference to specific periods and clear units of measurement. A structured document has far more impact than a descriptive email.

Step 3: get ahead with a simplified ESG report

Instead of reacting to each request, take the initiative. An ESG report aligned with the VS (Voluntary Standard, formerly VSME), the voluntary European standard, is recognised by banks and makes the assessment process easier. It isn't mandatory, but it has real commercial value. Find out more in VS (formerly VSME) explained: a practical guide for SMEs.

What happens to companies that don't respond?

Not responding to lenders' ESG requests has practical consequences, and those consequences tend to worsen over time.

Short term

In the short term, the company may lose access to specific lines or see its credit process delayed for lack of information.

Medium term

In the medium term, as ESG criteria become standard in bank risk assessment, companies without a history of ESG data will be progressively penalised in the terms they are offered.

Knock-on effect

There is also a knock-on effect. Large industrial and retail groups already covered by the CSRD will require ESG data from their suppliers, who are, in most cases, SMEs. A company that can't respond to a bank will struggle to respond to a major client. And losing a major client weighs far more, and far more immediately, than a slightly higher spread.

In summary: ESG as a financial lever

The link between ESG and financing is not theoretical: it is regulatory, commercial and increasingly operational.

Banks

Portuguese banks, like other European banks, must integrate ESG risk into their analyses.

Green lines

Green credit lines have explicit ESG criteria.

Large clients

And large clients are already passing on to their suppliers the reporting pressure they receive from regulators.

The question for a CFO

For a CFO, the question is no longer "is it worth investing in ESG?". The question is "what is the cost of not doing so?"

And that answer is becoming clearer all the time: in spreads, in missed opportunities and in difficult conversations with clients and lenders.

Start today with Sustanya

Sustanya is the ESG management and reporting platform built for SMEs. It helps you organise the data banks ask for, structure a report aligned with European standards and track the evolution of your ESG performance over time, without unnecessary bureaucracy.

Explore the Sustanya platform demo →