SME definition and asset classes

Hi there,

Where should SME real estate loans sit? Should this be part of SME loans and therefore considered optional, or should they be within the required commercial real estate category, noting the latter requires only 67% m2 coverage as minimum.


I am also looking for clarity about the scope 3 requirements for SMEs. The guidance notes that: The SBTi’s streamlined route for SMEs enables them to bypass the initial stage of committing to set a science-based target and the standard target validation process. SMEs can immediately set a science-based target for their scope 1 and 2 emissions by choosing from one of the predefined target options available in the SME Target Setting Letter. Unlike larger companies, the SBTi does not require SMEs to set targets for their scope 3 emissions; however, SMEs must commit to measure and reduce their scope 3 emissions.

Could you please clarify what the difference between a requirement to “reduce” and the lack of requirement to “set target” in this statement? One of the benefits we tout of the Portfolio Coverage Approach is that by engaging to encourage target-setting, we are improving management of material scope 3 emissions in our portfolios—even without robust disclosure of scope 3 yet. If this is not strictly the case for small and medium enterprises, we would like to be very clear about this.

Hi there, just wondering if there was an update on the above queries? Thanks

For SMEs the options in the target setting letter are either 1.5C or Well-below 2C implying emssion reductions of -50% or -30 by 2030 respectively. In both cases, the company commits to measuring and reducing its scope 3 emissions without having to specify a reduction rate.

Hi VickyH,
You raise an interesting question that doesn’t really have an evident answer. Currently, we I think the following describes a way to treat this:

  • In the case the SME is a real estate company, the loan should be treated as a corporate commercial real estate loan which would require a minimum of 67% coverage.
  • If the loan is to an SME to eg. fund its purchase of real estate, then the loan would be optional as it falls under the heading corporate lending, SME loans.

All the best,