Companies of all sizes will get more support in securing green and sustainability-linked loans, with a new grant scheme launched by the Monetary Authority of Singapore (MAS) yesterday.

The initiative, called the Green and Sustainability-Linked Loan Grant Scheme, is the first of its kind in the world and would start in January next year, said MAS.

It will also encourage banks to develop frameworks so small and medium enterprises (SMEs) can access such financing more easily.

Managing director Ravi Menon said: “Loans are a key source of financing across Asia – be it for individuals, SMEs or large corporates. Therefore, there is significant opportunity to encourage firms across different industries to transition to more sustainable practices through green and sustainability-linked loans.

 “MAS’ grants for green loans and bonds are an important part of the green finance ecosystem that Singapore is building – to support Asia’s pivot towards a sustainable future.”

Singapore companies borrowed US$10.2bil through green and sustainability-linked loans by the first half of this year.

Green loans are those that help finance new or existing green projects, while sustainability-linked loans provide price incentives for borrowers to achieve sustainability performance targets.

To this end, the new grant scheme will cover up to US$100,000 of a borrower’s expenses in validating the green and sustainability credentials of a loan over a three-year period. Such costs are incurred for example in obtaining external reviews and reporting on the sustainability impact of the loan.

Additionally, the scheme will support banks when they develop frameworks that will provide standardised criteria and processes for green and sustainable financing.

The grant scheme will defray up to 60% of the banks’ expenses, capped at US$120,000 for such green and sustainability-linked loan frameworks.

This amount will cover expenses to engage service providers to develop frameworks, obtain external reviews and report on the loans originated under the framework.

Furthermore, it will defray by 90% the expenses incurred by banks to develop frameworks specifically targeted at SMEs and individuals, capped at US$180,000 per framework.

“This is to further encourage banks to provide greater support to SMEs, which are a key driver of economies, and enable individuals to contribute to the sustainability agenda by integrating sustainability considerations in their financing decisions, ” MAS said.

Together with the launch of the scheme, OCBC Bank, United Overseas Bank (UOB) and BNP Paribas announced frameworks that will qualify for the grant.

OCBC’s framework will help SMEs access sustainable financing of up to US$20mil, which will cover green projects that are related to categories such as energy efficiency, green buildings and pollution control, among others.

OCBC Bank head of global commercial banking Linus Goh said: “This framework is designed to make it simple for SMEs to access green financing for their businesses and projects, without the complexity and cost of establishing a customised framework for each company.

“We believe this will help our SME customers accelerate their sustainability plans – both the SMEs which are enabling the change of industries and businesses as service providers in sustainability, as well as SMEs across all industries which are beginning to evaluate and adopt sustainability practices in their businesses, directing investments into green businesses, technology and infrastructure.”

UOB also launched a framework to finance companies contributing to smart city creation. Firms must be able to show how their activities promote better quality of life for residents through improved energy efficiency, green transportation and sustainable water and waste management, among other factors. UOB head of group wholesale banking and markets Frederick Chin said: “The United Nations estimates that US$2.5 trillion is required annually for developing countries to bridge the financing gap in achieving the sustainable development goals by 2030.

Source: The Straits Times Singapore

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