There’s a cost that doesn’t appear on any balance sheet, but sustainability teams
across the banking sector know it intimately. Call it the verification tax — the time,
money and operational drag that comes from trying to assess the climate and transition
risk of thousands of SME customers who simply don’t report structured sustainability
data.
And it’s getting more expensive by the year.
Under frameworks like the PRA’s Climate-Related Financial Disclosure rules and the
incoming requirements tied to the EU’s CSRD, banks are expected to demonstrate
credible, portfolio-level understanding of their financed emissions and climate
exposure. The problem? Most of that exposure sits with private companies — SMEs
with turnover between £2m and £100m — who produce no structured ESG data
whatsoever.
So what do banks do? They survey. They chase. They manually compile, cross-
reference and model. And then they do it again next year, because the data goes stale.
The result is sustainability teams buried in fragmented, non-comparable datasets that
can’t credibly support decision-making or external disclosure. That’s not just an
inefficiency problem. It’s a risk problem.
The SME blind spot is a regulatory exposure
It’s estimated that the vast majority of UK SMEs are not reporting or sharing
sustainability data in a structured form. For a bank with tens of thousands of business
customers, that means the portfolio-level climate picture is largely a guess —
educated, perhaps, but a guess nonetheless. Regulators are not going to accept
guesses for much longer.
This is precisely the gap that the Climate Action Platform, developed and deployed by
NatWest and National Australia Bank, was built to address. Powered by 423 and TDH,
the platform equips SMEs with the tools to build their own sustainability data profile —
capturing emissions, transition actions and relevant disclosures — while giving banks
access to consistent, structured data at scale. No surveys. No manual chasing. No
verification tax.
The platform uses bank-grade digital infrastructure to enable scalable SME
engagement, automated technical verification and standardised impact reporting. For
banks with exposure to green credit lines this kind of verified data infrastructure isn’t a
nice-to-have. It’s the difference between deploying green finance confidently and
leaving it on the table.
Paying the tax is a choice
The verification tax is real, but it isn’t inevitable. Banks that continue to rely on surveys
and manual processes will keep paying it — in staff time, in regulatory risk, and in
missed green finance opportunities.
Those that invest in scalable, automated data infrastructure will not only meet their
reporting obligations more credibly — they’ll build the kind of customer relationships
that generate lasting commercial value.
Interested in how the Climate Action Platform could work for your institution? Get in
touch with The Disruption House.
