Smaller businesses will be critical to the transformation into a low-carbon economy. This will depend on access to the right kind of finance.
Working with our network of more than 200 delivery partners, the Bank has an important role to play in both helping to finance sustainable technologies and their adoption by smaller businesses alongside developing a more sustainable financial ecosystem in the UK.
Our responsible finance approach
The British Business Bank’s mission is to drive economic growth by helping smaller businesses get the finance they need to start, scale and stay in the UK.
Responsible finance is an important part of how we deliver that mission. It helps us consider environmental, social and governance matters in a practical and proportionate way when we invest, work with partners and report on our progress.
Our approach is designed to support long-term value creation, manage relevant risks and help build a more sustainable finance ecosystem for smaller businesses.
Our approach
- We consider sustainability where it matters. We take environmental, social and governance considerations into account where they are relevant to investment performance and our public policy objectives.
- We look across both individual investments and the wider portfolio. This helps us understand how sustainability-related risks and opportunities may change over time.
- We apply a proportionate approach. We recognise that expectations should reflect the sector, business model, stage of growth and type of finance involved.
Key sustainability themes
Our responsible finance approach focuses on three broad themes that are important for long-term economic growth and resilience:
- Climate change – supporting the transition to net zero in line with HMG commitment.
- Nature and biodiversity – helping to reduce environmental harm and support the protection and restoration of nature.
- Human rights and wellbeing – supporting equal opportunity, inclusion and healthier, more resilient and prosperous communities.
Standards and commitments
- We are a signatory to the Principles for Responsible Investment. This means we are committed to considering environmental, social and governance matters in investment analysis, stewardship, disclosure and reporting.
- Our approach reflects relevant UK Government commitments on climate change, biodiversity and human rights, as well as applicable legal and regulatory requirements, including climate-related financial disclosure obligations.
How sustainability is embedded in investment decisions
- Before making an investment or financing decision, we consider relevant sustainability-related risks and opportunities and discuss them with companies or delivery partners where appropriate.
- Investment papers include relevant sustainability considerations, including any expectations or actions that may be needed.
- We assess delivery partners using a sustainability maturity framework and support them to strengthen their practices over time.
Stewardship
Stewardship is about how we work with companies, fund managers, delivery partners and the wider market after investment decision. We focus on three levels:
- Direct stewardship – engaging with investee companies on sustainability practices, data and governance.
- Indirect stewardship – working with fund managers to strengthen responsible investment and reporting.
- Market stewardship – contributing to industry initiatives and sharing good practice to support sustainable finance for smaller businesses.
Transparency and reporting
We request sustainability data from investee companies, fund managers and delivery partners using standardised approaches where possible.
We regularly review our own sustainability reporting so it remains aligned with good practice, regulatory guidance and the needs of our stakeholders.
Our approach in our Investment business and Banking business is reviewed annually to ensure it remains current and continues to support the Bank’s mission.
Business owners looking to make their business more sustainable can visit the Sustainability section of our Finance Hub.
The Finance Hub offers independent and impartial information on a variety of subjects for smaller businesses.
The British Business Bank also supports the SME Climate Commitment, which you can learn more about at the SME Climate Hub.
The Bank has also published several research reports related to its environmental and social objectives, most recently Smaller Businesses and the transition to net zero and What Works – Improving Diversity in Venture Capital Funding.
The rest of the Bank’s research can also be found in the Research library.
Our sustainability reporting and disclosures
This year, the Bank again included a Climate-related Financial Disclosures’ (CFD) in its Annual Report and Accounts (.PDF, 16.16 MB)(Opens in new window).
This includes reporting on emissions generated by our own operations, which the Bank is committed to reducing over time.
We are proud to be a member of the Partnership for Carbon Accounting Financials (PCAF) and an active participant in the UK Chapter’s Business Loans and Unlisted Equity Working Group.
The Bank is particularly engaged with Bankers for Net Zero’s ‘Mobilising SMEs for Climate Action’ workstream.
We also co-chair Project Perseus.
In partnership with Venture ESG, the BVCA and InvestEurope, we work with other asset owners and managers to develop proportionate approaches to integrating ESG in venture capital that focus on driving value creation.
The Bank is a signatory of the Principles of Responsible Investment (PRI).
We commit to disclosing our activities related to these principles and progress made on an annual basis to the PRI.
The six Principles of Responsible Investment
Principle 1
We will incorporate ESG issues into investment analysis and decision-making processes.
Principle 2
We will be active owners and incorporate ESG issues into our ownership policies and practices.
Principle 3
We will seek appropriate disclosure on ESG issues by the entities in which we invest.
Principle 4
We will promote acceptance and implementation of the Principles within the investment industry.
Principle 5
We will work together to enhance our effectiveness in implementing the Principles.
Principle 6
We will each report on our activities and progress towards implementing the Principles.
