Sustainability Gaining Importance in Loan Negotiations with Larger German SMEs
Sustainability issues are increasingly becoming a factor in loan negotiations for medium-sized German companies, especially larger ones, according to KfW Research.
Berlin – Sustainability criteria are becoming a more prominent factor in loan negotiations for medium-sized German companies. In 2024, 37 percent of larger SMEs (50+ employees) reported that banks and savings banks raised sustainability aspects during their discussions. This is an increase of three percentage points compared to the previous year, according to an analysis by KfW Research. While public discussion on climate protection and sustainability may have subsided recently, German banks are increasing pressure on companies. Regulatory requirements are driving banks to consider climate-related risks more in their lending. This trend is particularly evident for larger companies within the SME sector. Among smaller SMEs (10-49 employees), 24 percent reported that sustainability was discussed in loan negotiations, up from 21 percent the year before. The manufacturing sector stands out, with 24 percent of companies indicating sustainability issues were raised, compared to 20 percent the prior year. Similar increases were also observed in the construction (15 percent) and retail (13 percent) sectors. "It is to be expected that banks and savings banks will focus even more on sustainability aspects in future loan negotiations due to regulatory requirements," stated Dr. Juliane Gerstenberger, SME expert at KfW Research. She stressed the necessity for companies to thoroughly examine their sustainability profile and systematically collect relevant data. Dr. Gerstenberger added that it can be challenging, especially for smaller companies, to understand and meet all sustainability requirements. She called for greater clarity, support, and uniform, cross-industry standards that consider the specific needs of smaller businesses. Overall, the proportion of SMEs that experienced sustainability aspects being discussed rose to 15 percent in 2024, consistent with the previous year. This is influenced by the fact that the majority of Germany's 3.84 million SMEs are very small.