For most banks today, slashing financed emissions isn’t just a climate buzzword, it’s a regulatory, reputational, and risk-management imperative. But despite growing disclosure requirements and net-zero commitments, many financial institutions remain in the dark about the very emissions they’ve committed to reduce because there is a blind spot centred on small and medium-sized enterprises (SMEs).
Banks can only manage what they measure. Yet the majority of financed emissions in loan portfolios stem from companies that do not routinely report greenhouse gas data. According to the business population estimates for the UK and regions 2025 analysis, SMEs represent over 99% of the business population, but only a tiny proportion have structured emissions information available for lenders to use.
This very gap is at the heart of financed emissions reporting struggles worldwide.
Why the Data Gap Exists
At a fundamental level, calculating financed emissions requires accurate client activity data that is used to find the amount of carbon each borrower emits, which is then attributed back to a bank’s financing activities. However, according to OMFIF’s industry analysis, one of the biggest hurdles for banks is the lack of high-quality, granular emissions data across lending portfolios, particularly for smaller firms where reporting simply doesn’t exist. Because of this, banks rely on a patchwork of sector averages, third-party estimates, and proxy data because most SMEs lack the capacity to measure or report emissions themselves.
This reliance on proxies and averages creates two fundamental problems:
- Inaccurate baselines: without real data, banks can’t confidently establish how carbon-intensive an SME client truly is.
- Misplaced risk signals: proxies can under- or overstate emissions, distorting risk assessments and financing decisions.
Financed emissions often make up the vast majority of a bank’s carbon footprint, dwarfing emissions from direct operations. If banks can’t see which borrowers are high emitters, they struggle to price risk, allocate green finance effectively, or steer capital toward lower-carbon SMEs, ultimately leading to mispriced portfolios, weakened climate credibility, and capital flowing in the wrong direction.
How TDH Can Help Banks See Clearly
The Disruption House and FourTwoThree have partnered to solve this structural data gap, combining secure SME data collection with advanced sustainability analytics to give banks the clarity they need on financed emissions and transition risk.
FourTwoThree provides the secure, enterprise-grade data collection layer. Backed by major banking institutions, its platform enables SMEs to track, manage and share structured sustainability information directly with their bank. Instead of fragmented requests and inconsistent spreadsheets, banks receive standardised, permissioned data that SMEs can update and control.
But collection alone is not enough. Raw data needs context, benchmarking and interpretation.
This is where TDH’s Digital Analyst comes in.
The Digital Analyst interrogates company disclosures, documentation and certifications to produce structured ESG scoring and emissions modelling, even where reporting remains incomplete. The methodology applies materiality weighting by NACE and SIC sector classification, enabling banks to understand which environmental and operational risks are most relevant for each borrower.
For banks, the outcome is transformational.
Instead of relying on sector averages and crude proxies, financial institutions receive company-level data suitable for financed emissions reporting, supply chain emissions tracking and net-zero alignment.
From Proxy to Precision
The SME financed emissions gap is not a minor reporting inconvenience. It is a structural blind spot that makes it harder for banks to set credible baselines, price transition risk accurately, and prove real-world impact. If lenders keep relying on broad proxies, they will keep funding decisions tethered to averages rather than performance, and that weakens both climate strategy and credit strategy. The path forward is not to push more surveys onto SMEs. It is to build a scalable visibility layer that turns what is already knowable into structured emissions insight. That is exactly where TDH fits, helping banks move from estimation to decision-grade intelligence, and from blind decarbonisation targets to measurable portfolio action.
