New industry guidelines, framework to ramp up green finance in Singapore
A FINANCIAL industry taskforce, convened by the Monetary Authority of Singapore (MAS), has launched a guide for climate-related disclosures and a framework for green trade finance.
These initiatives seek to accelerate green finance in Singapore through improving disclosures and fostering green solutions, said MAS in a statement on Wednesday.
The Green Finance Industry Taskforce's (GFIT) new framework for green trade finance and working capital provides a "principles-based" approach for banks to assess eligible green trade finance transactions, and specific guidance on recommended industry certifications for trade finance activities to qualify as green.
Guided by this framework, HSBC and UOB have piloted four transactions for renewable energy, recycling, agriculture and farming activities, to support businesses in greening their supply chains.
In a statement, UOB said that its first two green trade finance facilities have been extended to Musim Mas Group, a producer and distributor of palm oil products, and aquaculture firm Barramundi Group.
This will help support Musim Mas Group's working capital needs, in particular its sourcing of certified palm oil from responsible suppliers.
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Apart from significantly reducing greenhouse gas emissions through activities such as the installation of methane capture facilities, the group also has a smallholder programme which helps smallholder farmers produce palm oil sustainably.
Barramundi Group has obtained green trade and working capital facilities from UOB for the sourcing of sustainable raw materials. The firm is expanding its sustainability initiatives to support Singapore's "30 by 30" vision - to produce 30 per cent of Singapore's nutritional needs locally by 2030.
There is over S$1 trillion worth of trade that flows through Singapore, of which more than S$90 billion meets the requirements of being green and sustainable, data from the Singapore Department of Statistics showed.
"These trade flows provide an immense opportunity for us to work with companies to offer green trade financing and to support their trade flows through our regional network capabilities," said Frederick Chin, UOB head of group wholesale banking and markets.
Under the new framework, HSBC has also issued an Import Letter of Credit facility to Singapore-based firm Swelect.
The facility differs from a regular trade facility in that it requires Swelect to continue meeting certain criteria in order to retain its green classification, said HSBC in a statement.
The solar photovoltaic components procured by Swelect must carry certification from one of the world's leading testing service providers, and it will need to keep the certification in full force and effect under the green facility extended by HSBC.
The lender also extended a green trade loan to World Metals, a local small and medium-sized enterprise in the metal recycling industry. The firm was seeking additional working capital to finance the refinery and recovery of precious metal from e-waste.
Iain Morrison, HSBC Singapore's head of global trade and receivables finance, said the "deep due diligence" associated with the assessment of a loan's use of proceeds for green finance has in the past required significant resource and additional costs.
"Leveraging the green trade finance framework, HSBC was able to support World Metals not only in its financing and growth needs, but its sustainability agenda too," he noted.
Apart from the new framework, GFIT has also launched a guide for climate-related disclosures that outlines specific disclosure practices for each of the banking, insurance and asset management sectors, taking into consideration the different approaches that individual sectors could take.
It will help to enhance the quality of financial institutions' (FIs) climate disclosures, and facilitate more consistent and comparable disclosures across FIs, said MAS.
GFIT has also published a White Paper outlining recommendations and laying out a road map to scale green finance in the real estate, infrastructure, fund management and transition sectors.
These include a green securitisation platform to scale sustainable infrastructure investments in the region, and recommendations for the use of transition bonds and loans in the shipping, oil and gas and automotive sectors to support more sustainable practices.
In the next phase, GFIT will partner industry associations, financial institutions and businesses to develop and implement the recommended proposals.
From May till April 2022, GFIT will also launch a series of workshops and e-learning modules for FIs and corporates.
These programmes aim to strengthen the capabilities of banks, insurers and asset managers in environmental risk management, enhance their environment-related disclosures, deepen knowledge of green finance instruments, and enable FIs and corporates to customise green financing solutions for transition sectors.
Gillian Tan, MAS assistant managing director (development and international), said: "GFIT's initiatives to enhance climate-related disclosures and strengthen green capabilities will enable financial institutions to effectively develop green solutions and align their portfolios towards facilitating Asia's transition to a low-carbon economy."
GFIT comprises representatives from FIs, corporates, non-governmental organisations and financial industry associations.
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