MAS published the reply of Tharman Shanmugaratnam of MAS, to the Parliamentary question on plans to expand the Green Bond Grant Scheme, with stricter regulations to ensure the adherence to the definition of eligible expenses. In his response, Mr. Shanmugaratnam emphasized that more work needs to be done globally to develop common standards and definitions and to enhance disclosure and reporting, in an effort to further reduce the greenwashing risks. Greenwashing involves a situation in which unsubstantiated or false claims on the environmental contribution of one’s products, services, or business activities are made.
Mr. Shanmugaratnam stated that the Green Bond Grant Scheme of MAS was launched three years ago to catalyze the green bond market in Singapore. In February 2019, MAS lowered the minimum issuance size from SGD 200 million to SGD 20 million to support more issuers, including medium-sized enterprises. MAS also expanded the scope of the scheme to include social and sustainability bonds and renamed it the Sustainable Bond Grant Scheme. Even with changes to the scheme, issuers of green bonds are required to have in place a green bond framework based on internationally accepted principles—governing the use of proceeds, the evaluation and selection of projects, and reporting on the allocation of proceeds to eligible projects. Issuers are also required to obtain independent external reviews to assure investors that their frameworks are robust and not subject to “greenwashing.”
MAS is looking into developing a grant scheme for green and sustainability linked loans, which could potentially be more relevant to small and medium enterprises (SMEs), as the loan proceeds can be used for general corporate purposes so long as borrowers meet relevant sustainability metrics. This is because, beyond green bonds, having access to a wider range of sustainability financing options would facilitate SMEs' adoption of sustainable business practices. MAS will calibrate the minimum qualifying loan amount to better meet the needs of SMEs.
Keywords: Asia Pacific, Singapore, Banking, Securities, Green Bonds, Green Bond Grant Scheme, Sustainable Finance, ESG, Climate Change Risk, MAS
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