The 2026 Sustainable Global Leaders Conference, alongside the Second Green Industry and Sustainable Consumption Expo, was held in Shanghai from October 20 to 22. During the "Materials Recycling and Circular Economy" dialogue at the October 22 forum themed "The Path of Circularity: Resources, Buildings, and Future Cities," Wang Yao, Dean of the International Institute of Green Finance at the Central University of Finance and Economics, offered her analysis of the financing difficulties facing small and medium-sized enterprises (SMEs) in the green sector. She noted that even as policy support continues to intensify, SMEs still widely report that financing is difficult and costly, with the crux concentrated in three areas.
First, the internalization of externalities remains unresolved. Wang Yao stated that the essence of green finance is the gradual internalization of environmental externalities—meaning that when a company performs well, its green premium is not reflected, and when it performs poorly, its costs do not rise significantly either. She pointed out that at the current stage of social development, green premiums are gradually emerging, but for many enterprises the internalization of externalities is still unresolved. This requires the government to fill the gap through structural monetary policy tools, fiscal interest subsidies, and other policy guidance, as well as coordination with non-fiscal financial policies in sectors such as construction.
Second, enterprises lack adequate standardization. Wang Yao noted that SME financial conditions may be unclear and opaque, and that such firms are mostly asset-light, with day-to-day transactions at a rudimentary stage and no standardized ledgers. "Resolving standardization is the easiest part," she said, advising enterprises to standardize their finances, taxes, and carbon assets from the very beginning, no matter how small their scale.
Third, asset forms do not match the logic of financial risk control. She analyzed that the resource recycling industry has two characteristics—long cycles and light assets—both of which are asymmetrical with existing financial supply: financial supply tends to be short-term, with commercial bank loans mostly one year and at most three years, while projects often require seven to fifteen years; traditional risk control logic looks at whether there is collateral, yet these new assets precisely lack collateral. "The logic of financial risk control must also change—it must change under the new circumstances," she said. She also noted that this situation is gradually changing. For green finance to truly benefit SMEs, "green" must be visible and calculable in pricing, ledgers, and risk control logic. Closing the externality gap depends on policy guidance, improving standardization depends on enterprises taking the initiative themselves, and adjusting risk control logic depends on financial institutions actively seeking change. Only when these three forces work together can the "living water" of green finance truly flow into the hands of those SMEs engaged in the circular economy.
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