Small and medium-sized enterprises (SMEs) are pivotal to global decarbonisation, yet they remain chronically underserved by mainstream finance. This study sought to systematically synthesises the emerging architecture of sustainability-driven financial models able to unlock SMEs’ low-carbon transition. Following PRISMA guidelines, we conducted a systematic literature review of 66 Q1/Q2 journal articles published between 2020 and 2025, complemented by NVivo-assisted thematic coding in line with our study objectives. Our findings through thematic analysis revealed three core categories of sustainability-driven financial models targeted at SMEs: green bonds and loans, blended-finance, and FinTech-enabled instruments. Furthermore, it was revealed that SMEs encounter five persistent barriers: collateral shortfalls, perceived credit risk, information asymmetry, short-termism and institutional bias. The evidence was majorly based on quantitative studies that focused on BRICS and Western economies; thus, exposing gaps in cross-regional and qualitative insights. The findings suggest that although financial innovation is advancing, it is uneven in coverage and inaccessible to SMEs in less-researched regions. Without addressing structural and informational bottlenecks, the full potential of green finance to decarbonise SMEs—and thus contribute to climate action (SDG 13)—may remain unrealised. To fully unlock SME low-carbon transition, we urge policymakers and finance institutions to bring climate policy and carbon pricing into alignment, strengthen public–private collaborations, require climate-risk disclosure, build interoperable green-data infrastructure and adopt transparent impact-evaluation tools.