Experian has announced the launch of ESG Insight, a new service that provides lenders with a much faster, more precise understanding of environmental, social and governance risk (ESG) within their SME lending portfolio.

The first of its kind, ESG Insight delivers a highly tailored estimate of an SME’s greenhouse gas (GHG) emissions split by scopes 1, 2, and 3 combined with a classification of its social impact and governance levels, sourced from Experian’s unrivalled business reference dataset.

The data-driven solution provides an alternative to previous methods, significantly reducing time and cost, and allowing lenders to gain valuable, actionable customer insights with an ESG lens. Among the wide range of critical factors that are assembled in order to create a view of a company’s emissions are estimated energy consumption, number of employees at a site and the proportion of those that commute by car.

Previously, lenders needed to ask SMEs to undergo a full emission assessment or rely on broad-brush sector wide emissions averages as a proxy.

Simple to deploy, the dataset covers the UK’s 4m SMEs, arming lenders with the relevant information to meet mounting requirements to report and actively manage this increasingly important risk lens.

As of the start of 2022, regulators are actively enforcing requirements for the management of climate-related financial risks, as such a lender needs to understand the climate and broader ESG-risk of its SME customers.

James McGarva, Managing Director of Experian Business Information, said: “SMEs are responsible for 34% of the UK’s total emissions, and yet current estimation processes fail to differentiate between, for example, a small independent bookshop versus a UK-wide frozen-food retailer. This typically means over estimation for smaller businesses by an average of nearly 200%.

“ESG Insight provides a far more comprehensive view of emission estimates, together with social impact and governance ratings, so lenders can confidently baseline, report, and target actions to manage the climate risk with any SME portfolio. We’re excited that our latest innovation is playing a positive role in the global mission to tackle climate change”