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MAS debuts grant scheme to support green and sustainability-linked loans

MAS debuts grant scheme to support green and sustainability-linked loans

The Singapore city skyline. (Photo: AFP/Roslan RAHMAN)

SINGAPORE: Companies and banks will soon get more support to obtain and develop green and sustainable financing under a new scheme by the Monetary Authority of Singapore (MAS).

The Green and Sustainability-Linked Loan Grant Scheme (GSLS), announced on Tuesday (Nov 24), will take effect from Jan 1 next year.

Describing the GSLS as "the first of its kind globally", MAS said in a media release that it seeks to support companies of all sizes to obtain green and sustainable financing.

READ: Singapore launches first institute dedicated to green finance research and talent development

Under the scheme, MAS will defray up to S$100,000 of the expenses that companies incur to validate the green and sustainability credentials of a loan.

This includes expenses to engage independent sustainability assessment and advisory service providers to develop green and sustainability frameworks and targets, obtain external reviews and report on the sustainability impact of a loan.

The GSLS also encourages banks to develop green and sustainability-linked loan frameworks to make such financing more accessible to small- and medium-sized enterprises (SMEs), MAS said.

It will defray up to 60 per cent of expenses, capped at S$120,000, incurred by banks to engage independent sustainability assessment and advisory service providers, obtain external reviews and report on the allocated proceeds of loans originated under the framework.

The amount defrayed increases to 90 per cent of expenses, capped at S$180,000, for banks' development of loan frameworks that specifically target SMEs and individuals.

"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.

READ: Shades of green – Banks take bigger steps toward greener finance amid climate change push

With immediate effect, the authority will also expand the scope of its existing Sustainable Bond Grant Scheme (SBGS) to include sustainability-linked bonds.

Beyond existing grant support for pre-issuance costs, the enhanced SBGS will now cover post-issuance costs of engaging independent service providers to obtain external reviews or report for bonds under the scheme, MAS said.

Mr Ravi Menon, managing director of MAS, said that loans are a key source of financing across Asia for individuals, SMEs and large corporations.

"Therefore, there is significant opportunity to encourage firms across different industries to transition to more sustainable practices through green and sustainability-linked loans," he said.

"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."

BANKS LAUNCH GREEN AND SUSTAINABLE LOAN FRAMEWORKS

Accompanying the launch of the GSLS, BNP Paribas, OCBC Bank and UOB have introduced loan frameworks that will qualify for the scheme, MAS said.

OCBC's SME Sustainable Finance Framework will allow firms to access sustainable financing of up to S$20 million, the bank said in a separate media release on Tuesday.

The SMEs must be involved in activities across eight "green project" categories including clean transport, renewable energy and green buildings.

LISTEN: What is corporate climate action and why companies need a paradigm shift

"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," said Mr Linus Goh, OCBC's head of global commercial banking.

"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-linked efforts such as renewable energy, sustainable water and waste water treatment, 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," he added.

READ: Demand for green bonds expected to continue despite COVID-19 setback

UOB has also launched a Smart City Sustainable Finance Framework to make sustainable financing more accessible to companies contributing to the creation of smart cities, the bank said in a media release.

Firms must be able to show that their activities promote a better quality of life for residents through the use of renewable energy, green building construction, improved energy efficiency, green transportation, sustainable water and waste management, and climate change adaptation, said the bank.

"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," said Mr Frederick Chin, UOB's head of group wholesale banking and markets.

"Financial institutions can and must play a part, together with governments and businesses, to help channel more funds to sustainable development. Such efforts will go a long way in making the cities of Asia more sustainable and liveable."

Source: CNA/dv(hs)

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