Companies of all sizes will now receive more support to obtain green and sustainable financing from the Monetary Authority of Singapore (MAS) through the Green and Sustainability-Linked Loan Grant Scheme (GSLS).

The GSLS, which is an initiative under MAS’s Green Finance Action Plan, was announced on Nov 24 and will be effective from Jan 1, 2021.

The GSLS is the first of its kind in the world and seeks to support corporates by defraying the expenses of engaging independent service providers to validate the green and sustainability credentials of the loan.

MAS says it will defray up to $100,000 of these expenses, which include the cost of hiring independent sustainability assessment and advisory service providers to develop green and sustainability frameworks and targets, obtain external reviews (which includes a second party opinion, verification, certification or rating), and report on the sustainability impact of the loan.

According to a statement by the MAS, the GSLS will also encourage banks to develop green and sustainability-linked loan frameworks to make such financing more accessible to small and medium-sized enterprises (SMEs).

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Under the grant, banks can claim up to 60% expenses capped at $120,000 that are incurred while developing frameworks, obtaining external reviews and reporting on the allocated proceeds of loans originated under the framework.

In a bid to provide greater support to SMEs, which are seen as a key driver of economies, MAS says it will also defray 90% of expenses by banks to develop frameworks that are specifically targeted at SMEs and individuals, capped at $180,000 per framework.

To add, MAS will expand the scope of the existing Sustainable Bond Grant Scheme (SBGS) to include sustainability-linked bonds. The expansion of the scope will be effective from today onwards.

The enhance SBGS will now 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. Previously, the SBGS covered pre-issuance costs only.

Accompanying the launch of the GSLS, BNP Paribas, OCBC Bank and UOB have introduced innovative green and sustainability-linked loan frameworks, featuring a standard set of criteria and processes, that will qualify for the scheme.

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“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,” says MAS’s managing director Ravi Menon.

“MAS’s 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,” he adds.

“Singapore is Asia’s top logistics hub offering world-class connectivity. With the unprecedented boom in regional cross-border trade and with the challenges that Covid-19 has brought to the supply chain network, we believe that it is crucial for banks to increase their efforts to help clients incorporate sustainable supply chain practices. Banks that pioneer best practices in this area can help to facilitate a cascade of positive change that will flow throughout supply chain and global trade networks," says Joris Dierckx, CEO of BNP Paribas Singapore.

OCBC's head of global commercial banking Linus Goh adds, “We are pleased to launch the OCBC SME Sustainable Finance Framework, developed with the support of the newly-launched MAS grant scheme for green and sustainability-linked loans. As a leading SME bank in the region, our ambition is to make SME financing green — to help SMEs in the shift towards greener businesses and sustainable development. Over the past two years, we have supported SMEs and mid-cap corporates in their maiden green loans and projects in green buildings, hospitality, construction and solar projects totalling over $1.6 billion".

"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. At UOB, we are committed to balancing opportunity with responsibility and helping businesses across the region advance responsibly through sustainable financing. Under our UOBSCSFF, we will be able to support the sustainability efforts of more companies from various sectors, working with them closely for the development of sustainable and smart cities," says Frederick Chin, head of group wholesale banking and markets at UOB.