Alternative data pivotal for SMEs trying to reach net zero

A LOT of small firms face a catch-22. They struggle to get credit because they have no credit history, but they cannot build up a credit history without access to loans. This creates a problem for wider society as small and medium-sized enterprises (SMEs) are the main employers in most economies. In Singapore, they contribute to nearly half of the nation's gross domestic product and employ about 70 per cent of the local workforce.

And, because Singapore is a small island, SMEs here face a further hurdle: they have to trade outside its borders. But, as the Monetary Authority of Singapore (MAS) points out: "SMEs face considerable friction and challenges in achieving quick and seamless access to cross-border trade opportunities and financial services". That is something Singapore is keen to solve. Manufactured goods were Singapore's largest export earner in 2020, generating US$515.6 billion, twice the figure for services.

But the support that Singapore gives its trading SMEs is also important far beyond its borders. Without investment by SMEs in net zero, the climate agreement goals are unlikely to be achieved. Research by HSBC and Boston Consulting Group, Delivering Net Zero Supply Chains, estimates that up to US$50 trillion is needed by SMEs globally to ensure that supply chains become sustainable.