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Singapore Pushes Green Finance Agenda

Tom Burroughes, Group Editor , 26 November 2020

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The initiative highlights how financial centres such as Singapore intend to build a reputation for “green finance”, seen as a hot area. It fits within a torrent of news and commentary on what is called ESG investing, aka environmental, social and governance-driven investment ideas.

Singapore is pushing a green and “sustainability” scheme that helps pay companies’ costs of getting independent organisations to vet loans.

The Monetary Authority of Singapore this week announced that it had launched the Green and Sustainability-Linked Loan Grant Scheme (GSLS), taking effect from January next year. The GSLS “seeks to support corporates of all sizes to obtain green and sustainable financing by defraying the expenses of engaging independent service providers to validate the green and sustainability credentials of the loan.”

BNP Paribas, OCBC Bank and UOB have introduced innovative green and sustainability-linked loan frameworks that will qualify for the scheme. 

“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,” Ravi Menon, managing director of MAS, said.

The initiative highlights how financial centres such as Singapore intend to build a reputation for “green finance”, seen as a hot area. It fits within a torrent of news and commentary on what is called ESG investing, aka environmental, social and governance-driven investment ideas.

MAS said the grant also encourages banks to develop green and sustainability-linked loan frameworks to make such financing more accessible to small and medium-sized enterprises. The GSLS will give companies a better chance to obtain green and sustainability-linked loans. The regulator will defray by 90 per cent the cost incurred by banks to develop frameworks specifically targeted at SMEs and individuals, capped at S$180,000 per framework. This is designed to encourage banks to give more support for SMEs.

The regulator also said it will widen the scope of the existing Sustainable Bond Grant Scheme (SBGS) to include sustainability-linked bonds, with immediate effect. The enhanced programme will cover the post-issuance costs of engaging independent sustainability assessment and advisory service providers to obtain external reviews or report for bonds under the scheme.

An associated trend has been the rise of "green bonds" - financial investments in supposedly renewable energy sources, low/zero-carbon emission technologies, recycling certain materials and other areas. To see an analysis of how such bonds have fared during the COVID-19 crisis, click here.

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