MAS Outlines Options to Promote Sustainability-Linked Loans to SMEs
When asked in the Parliament about the plans to make green financing more accessible to small and medium-size enterprises (SMEs), Tharman Shanmugaratnam of MAS emphasized that MAS is taking further steps to promote green and sustainability-linked loans to SMEs. Later this year, MAS will launch a Green and Sustainability-Linked Loan Grant Scheme, which will be open to SMEs and other corporates. This grant will defray the cost of obtaining independent external reviews to demonstrate that sustainability targets are material and to verify that the loan proceeds will be channeled to green and sustainable activities.
According to Mr. Shanmugaratnam, another possible solution for promoting green and sustainability-linked loans is to develop lending frameworks that provide simplified processes and set out clear standardized criteria for borrowers. With such lending frameworks, there would be no need to engage external reviewers to develop, verify, and maintain customized green finance frameworks for each borrower. HSBC’s Green Loan Framework for SMEs, which was launched in Singapore in March 2020, is a promising start and MAS will encourage more lenders to develop such frameworks. As green and sustainable finance activities grow in Singapore, the anchoring of relevant capabilities here will help to bring such loans into the mainstream while encouraging more SMEs to adopt green and sustainability financing. Green and sustainable financing flows are growing strongly in Singapore. From 2019 till the first half of this year, approximately SGD 4.8 billion of green and sustainability bonds were issued in Singapore. However, the green share of total loan and bond transactions in Singapore remains modest at less than 5%, reflecting the significant opportunity for growth.
Keywords: Asia Pacific, Singapore, Banking, Securities, Green Finance, Sustainable Finance, ESG, SME, MAS
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