Sage Launches SME Carbon Tracking API for Banks

Sage, a provider of accounting and financial software for small and medium-sized enterprises (SMEs), has introduced a Carbon Measurement API to assist banks in supporting their SME customers' transition to net-zero emissions. 

The new tool is designed to help financial institutions enhance their green lending practices by offering an integrated carbon accounting solution for SMEs.

Carbon accounting challenges

Banks worldwide face increasing pressure to reduce their carbon emissions, including those financed through their lending activities. 

The Partnership for Carbon Accounting Financials (PCAF) framework, established in 2019, has highlighted the difficulties banks encounter in tracking emissions linked to their SME portfolios due to a lack of direct data.

George Sandilands, VP Carbon Accounting at Sage, says: “By fostering a more sustainable business environment and offering tailored green finance products to their customers, banks can now better serve their SME customers by offering the tools needed for accurate carbon reporting.”

SMEs, for their part, often struggle to report their emissions due to limited resources and expertise. Sage's new API aims to address this issue by simplifying the carbon reporting process for small businesses.

Improving data quality

The Carbon Measurement API is designed to help banks meet PCAF standards, which provide a standardised approach for measuring and reporting greenhouse gas emissions associated with loans and investments. 

Sage claims the tool can improve the quality of emissions data, potentially moving banks from less precise estimates (PCAF 5) to more accurate, primary data (PCAF 2).

Darren Pirie, Climate Propositions Lead at NatWest, states: “We need to provide carbon accounting and decarbonisation services to our 19 million business customers in the UK. By partnering with Sage, we are enabling businesses across the UK to embrace sustainable practices with confidence.”

The API aims to simplify carbon reporting for SMEs by allowing them to connect their accounting software to the tool. Sage says the system uses artificial intelligence and machine learning technologies to automate data collection and analysis, potentially improving the accuracy of carbon footprint calculations.

This streamlined process is intended to make it easier for SMEs to report their emissions to banks during the lending assessment process. Sandilands adds: “Sage is on a mission to support businesses on their journey to sustainability. This solution helps drive a greener economy, and in turn, reduces banks' financed emissions.”

Sage's Carbon Measurement API is designed to integrate seamlessly with banks' existing platforms, allowing for a more efficient implementation process. This integration capability is crucial for banks looking to enhance their green lending practices without overhauling their current systems.

Impact on green lending

The introduction of this tool could have significant implications for green lending practices in the banking sector. By providing more accurate and readily available carbon emissions data for SMEs, banks can make more informed decisions about their lending portfolios and potentially offer more tailored green financial products.

While the tool is initially being launched in the UK market, its potential applications are global. As more countries implement stricter regulations on carbon emissions and sustainable finance, solutions that bridge the gap between SMEs and financial institutions could see increased demand.

Sandilands notes: “We're seeing interest from banks across multiple regions. The need for accurate carbon accounting in the SME sector is a global challenge, and we believe our solution has the potential to make a significant impact internationally.”

Sage indicates that this is just the first step in a broader strategy to support sustainable business practices. The company is exploring additional features and integrations that could further enhance the tool's capabilities.

“We're continuously gathering feedback from both banks and SMEs to refine and expand our offering,” concludes Sandilands. “Our goal is to create a comprehensive ecosystem that supports sustainable business growth and facilitates the transition to a low-carbon economy.”

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