Exploring implications of the EU Taxonomy on funding and disclosure for Swedish SMEs

Abstract: In 2019 the EU taxonomy was launched as a classification system that aims to provide a common language and framework for sustainable finance. The purpose is to guide investors and businesses to identify environmentally sustainable economic activities to support the transition towards a low-carbon, resource-efficient economy by 2050 within the EU. However not all organizations are covered by the regulation. One group that falls out are European small and medium sized enterprises (SMEs), even though they represent 50% of the total GDP and are responsible for 70% of EU industrial pressure on the environment (Statista Research Department, 2023). Despite not being covered by the EU Taxonomy concerns have been raised that SMEs might be affected indirectly, however the knowledge on how the EU Taxonomy might influence SMEs is still unclear. Following the lack of research on the EU Taxonomy in relation to SMEs (Dinh, Husmann & Melloni, 2023; Nishitani et al., 2021) this study aimed to explore what financial and disclosure-related implications the EU Taxonomy might have on SMEs in Sweden and if there are incentives on voluntary taxonomy disclosure, with examples from the forestry sector. The study was conducted through a qualitative thematic analysis of 13 semi-structured interviews with representatives from Swedish banks, SMEs and Swedish and international trade organizations. This thesis aimed to contribute to current knowledge by investigating whether there are uncertainties and divisions amongst banks in Sweden regarding how the EU Taxonomy could affect their SME clients. The findings of this study imply that there are tendencies of banks wanting to include taxonomy data collection from SMEs to improve their own taxonomy alignment disclosure, although the thoughts are divided. The findings further suggests that by voluntary reporting on taxonomy data SMEs could gain advantages in terms of accessing finance from banks, although increased reporting comes with challenges for SMEs such as lack of resources and insufficient understanding of the regulation.