By June 2026, every UK bank must show the PRA a credible gap analysis against SS5/25,
the supervisory statement that now treats climate risk as core prudential risk.
For banks with sustainability-linked loans across their SME book, the hardest gap to
close isn’t governance. It’s the emissions number sitting behind the loan.
Risk teams reviewing those numbers are increasingly finding incomplete spreadsheets
and estimates nobody can stand behind.
When a Borrower’s Claim Becomes the Bank’s Liability
The FCA’s anti-greenwashing rule requires that any sustainability claim a bank makes is
fair, clear and substantiated. That obligation doesn’t disappear just because the
underlying data came from a customer, not the bank itself.
Sustainability-linked loans are already under scrutiny. Criticism of vague,
unenforceable targets pushed the Royal Bank of Canada to abandon its sustainable
finance goals in 2025, citing a lack of clear definitions and accountability in the SLL
market.
Once a bank prices a loan or reports financed emissions using a borrower’s self-
reported figure, that figure becomes part of the bank’s own disclosure. If it’s wrong, the
exposure lands on the bank, not the SME.
The Data Gap and the Verification Tax Are Two Different Problems
The Data Gap is that most SME transition data is fragmented, unstructured and not
streamlined — small businesses simply don’t produce audited emissions figures the
way listed corporates do.
The Verification Tax is separate: it’s the cost and friction of manually checking each
borrower’s claim, one relationship at a time, across a portfolio of thousands.
Banks that skip verification carry greenwashing risk. Banks that verify everything
manually absorb the cost in margin and relationship-manager time. Conflating the two
problems leads to the wrong fix.
Building Verification Into the Lending Relationship
This is precisely the gap the Climate Action platform, developed and deployed by
NatWest and National Australia Bank, is built to close.
Built on TDH’s sustainability intelligence, it gives relationship managers a consistent
way to corroborate SME transition claims against independent evidence, rather than
relying solely on a borrower’s own submission. It supports PCAF-aligned financed
emissions reporting with a clear record of the evidence type and disclosure strength
behind every number.
What This Means for Banking Sustainability Teams
Greenwashing exposure doesn’t start with intent to mislead. It starts wherever a bank
repeats a number it can’t independently corroborate.
SS5/25 gap reviews are a natural moment to ask whether SME transition data across
the book would hold up to scrutiny — not just whether the climate risk models do.
Verification, done consistently, is what turns a green lending target from a reputational
liability into a defensible one.
Talk to Our Team
If your SME transition data needs a verification layer your risk and compliance teams
can stand behind, explore the Climate Action platform, developed and deployed by
NatWest and National Australia Bank, or get in touch with TDH to discuss your portfolio.
