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MAS launches grant to support green and sustainability-linked loans

MAS on Tuesday announced a new grant scheme for green and sustainability-linked loans.

TO promote responsible financing among corporates, the Monetary Authority of Singapore (MAS) on Tuesday announced a new grant scheme for green and sustainability-linked loans.

The Green and Sustainability-Linked Loan Grant Scheme, which will be effective from Jan 1 next year, comprises two tracks.

First, it will cover up to S$100,000 per loan over a three-year period, of costs incurred by corporates to validate the green and sustainability credentials of loans. These costs include the engagement of independent service providers to develop green and sustainability frameworks and targets, obtain external reviews and report on the sustainability impact of the loan. Each loan must be at least S$20 million to qualify for this track.

Here, green loans refer to loan instruments made available exclusively to finance or refinance eligible green projects. Sustainability-linked loans refer to loan instruments that incentivise the borrower's achievement of predetermined sustainability performance targets.

Secondly, MAS's scheme also aims to encourage banks to develop frameworks for green and sustainability-linked loans, by defraying up to 60 per cent of the expenses incurred - capped at S$120,000 - in developing the frameworks, obtaining external reviews and impact reporting.

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Frameworks targeted at small and medium-sized enterprises (SMEs) and individuals will receive greater support, with the grant covering up to 90 per cent of expenses incurred per framework, capped at S$180,000.

To qualify for either track, MAS requires that at least half of the gross revenue from sustainability assessments and advisory work be attributable to Singapore-based providers.

With immediate effect, MAS will also expand the scope of the existing Sustainable Bond Grant Scheme (SBGS) to include sustainability-linked bonds. The enhanced SBGS will cover the post-issuance costs of engaging independent service providers to obtain external reviews or report for bonds under the scheme.

In a statement to the media on Tuesday, MAS 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."

Banks in Singapore on Tuesday also introduced targeted frameworks aimed at directing financing to activities promoting sustainable development in Singapore and the region.

OCBC's SME Sustainable Finance Framework allows SMEs to access up to S$20 million in funds to roll out their sustainability plans. These funds can be in the form of green loans, green letters of credit and green banker's guarantees.

The framework will apply to SMEs involved in activities across eight of the categories under the Green Loan Principles.

The Green Loan Principles was issued by the UK-based Loan Market Association to provide a consistent methodology for use across the green loan market while allowing loan products to retain their flexibility.

The eight project categories include clean transportation, eco-efficient and/or circular economy-adapted products, production technologies and processes, energy efficiency, green buildings, environmentally sustainable management of living natural resources and land use, pollution prevention and control, renewable energy, as well as sustainable water and wastewater management.

To widen access, OCBC's framework is applicable to projects in these categories even if they are not certified under internationally or nationally recognised sustainable schemes.

UOB's new sustainability framework is targeted at companies contributing to the creation of smart cities. In this case, smart cities refer to those that integrate physical infrastructure and digital spaces to enable a more environmentally-friendly city and higher quality of life for residents.

The lender's Smart City Sustainable Finance Framework sets out the criteria that must be met to access a range of sustainable banking products. These include requiring that companies have clear sustainability strategies and objectives, achieve their sustainability performance targets, and use the proceeds to further their sustainability agenda.

Under the framework, businesses must also be able to demonstrate how 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/or climate change adaptation.

UOB will monitor each company's management of loan proceeds and the environmental and social impact of its business activities on an annual basis.

BNP Paribas' sustainable supply chain financing framework will also be supported by MAS's new grant scheme. The bank will work with sustainability certification experts to establish key performance indicators to be achieved by suppliers. Under the framework, suppliers will access a lower cost of financing than their usual bank facilities.

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