Sustainable small business lending

• Sustainable small business lending could support global sustainability efforts. • German banks are in the process of implementing it. • Banks focus more on sustainability risks than on creating societal values in their small business lending activities. • Banks expect sustainability risks to become increasingly material in small business lending portfolios. • Relationship banking has some relevance in banks’ sustainability practices. Banks are the main source of external funding for small businesses. Thus, integrating sustainability considerations in small business lending can support global sustainability efforts. In surveying German banks, I show that banks are in the process of implementing sustainable small business lending. They put more emphasis on sustainability risks than on the transformation of the business model among small businesses. Sustainable relationship lending has some relevance in creating sustainability-related soft information, although respective hard information is preferred by banks. Banks and policymakers can use the findings to better apply sustainable small business lending to sustainability and resilience efforts.