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HSBC rolls out new green loan in bid to make green finance easier, less costly for SMEs

HSBC Singapore wants to make green finance easier and less costly for small and medium enterprises (SMEs) with a new green loan that will accept applications based on Singapore industry certifications.

This does away with the need for typically onerous green finance frameworks.

"We hear a lot of interest from SME clients in green loans, but we see limited action – this is not for want of trying, but comes down to accessibility," said HSBC Singapore's head of business banking Ng Li Lian to The Business Times, as the bank launched the SME Green Loan on Monday.

"SMEs can't afford the typical costs or time associated with green finance, with management teams already spread thin as they focus on the day-to-day running of the business," she added. 

Banks including HSBC typically have corporates establish bespoke green finance frameworks before applying for green loans to show that the use of loan proceeds will be in line with internationally recognised green standards. However, such frameworks involve assessing entire business models and getting external reviews, which could incur "thousands of dollars and weeks of development", according to Ms Ng. 

Such frameworks also allow larger corporates to raise multiple green financing instruments including green loans and green bonds under one framework over a number of years, which may not be as applicable to an SME with less diverse funding requirements.   

Doing away with the need for green finance frameworks in this loan could therefore provide significant time and cost savings. "For SMEs, it's the make or break in utilising green finance," Ms Ng said. 

In what it says is a first for the Singapore market, HSBC will accept applications for the new green loan from businesses holding the following industry certifications: 

  • Singapore Environment Council - Singapore Green Labelling Scheme (SGLS) and eco-certification schemes
  • Building and Construction Authority - Green & Gracious Award, and Green Mark Scheme (GoldPLUS and Platinum)
  • Singapore Green Building Council – product and services certification schemes
  • Green-e - Renewable Energy Certification

The certifications will help determine the validity of the use of loan proceeds. As further certifications are developed in Singapore, HSBC may look to expand its list of accepted certifications. 

The green loan will be issued on a term basis at a minimum limit of US$350,000, denominated in either Singapore dollars or US dollars. Applications will be subject to HSBC's usual credit-review process.

Demand for green finance from SMEs is growing, from those that are creating new business models to tap the growth in environmental awareness, as well as traditional ones that are waking up to the need for sustainability in their business models. 

In HSBC's 2019 Navigator survey, 64 per cent of the 200 Singapore firms surveyed (of which half were SMEs) had said they believe they have a role to play in delivering the United Nations' Sustainable Development Goals. 

"Hundreds of companies are pursuing green initiatives, ranging from the development of green products (as governed by the SGLS schemes), green F&B outlets, as well as the purchase of lower-emission or energy-efficient equipment," noted Ms Ng.

"Ultimately, every business has a part to play in transitioning to a low-carbon economy - we already have interest from clients in the electric vehicle, engineering or manufacturing, clean water and recycling sectors," she added.