Singapore Launches Program to Support Green and Sustainability Linked Loans

• The Monetary Authority of Singapore launched the world’s first grant scheme to support green and sustainability-linked loans (GSLS) on November 24, 2020.
• The scheme will assist corporations by defraying the expenses incurred from engaging with independent advisors to validate green and sustainability-linked loans.
• Further, the scheme provides incentives to banks to develop sustainability-linked frameworks that allow SMEs to better access these types of financing.

On November 24, 2020, the Monetary Authority of Singapore (MAS) launched the world’s first grant scheme to support green and sustainability-linked loans (GSLS), which will come into effect from January 1, 2021.

The GSLS comprises two tracks:

• Support corporations through a grant to defray the expenses of engaging with independent service providers to validate the credentials of the green and sustainability-linked loans; and
• Incentivize banks and other financial institutions to develop sustainability-linked loan frameworks to make such financing more accessible to small and medium-sized enterprises (SMEs), although the GSLS is available to corporations of all sizes.

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From 2019 to the first half of 2020, Singapore companies applied for over S$10 billion (US$7.4 billion) in green and sustainability-linked loans. Currently, BNP Paribas, OCBC Bank, and UOB Bank have qualified for the scheme.

The green and sustainability-linked loans

Under this track, the GSLS will cover up to S$100,000 (US$74,600) per loan for costs of engaging in sustainability service advisors for the following activities:

In the pre-origination stage

Developing a green loan framework;

• Set sustainability performance targets (SPTs) related to the sustainability-linked loans; and
• Obtain external reviews, such as for verification, certification, or rating of the previous two points.

In the post-origination stage

• Obtain another external review; and
• Report on the impact of the proceeds on SPTs or projects.

Who is eligible to apply?

Most domestic and international corporations can apply for this loan scheme, including organizations, such as the World Bank.

To be eligible, the green and sustainability-linked loan must meet the following criteria:

• The loan amount must be a minimum of S$20 million (US$14.9 million) and have a minimum tenure of three years;
• More than 50 percent of the gross revenue from the loan must be attributable to a Financial Sector Incentive (FSI) company;
• The assessment work, such as reviewing the eligibility of the project, must be done in Singapore;
• More than 50 percent of the advisory assessment work must be attributed to Singapore-based providers; and
• Additional external review requirements:
  • For green loans — an external review to be conducted to assess if the usage of the loan complies with internationally recognized green loan principles during the pre-origination stage; and
  • For sustainability-linked loans — an external review to be conducted to assess if the usage of the loan complies with internationally recognized sustainability-linked loans, in addition to at least two SPTs contributing to environmental objectives.

The green and sustainability-linked loan frameworks

This track is further divided into two funding tiers; these are:

• The green and sustainability-linked loan frameworks for SMEs and individuals (tier 1) — in this case, MAS will defray up to 90 percent of the expenses incurred by banks to develop frameworks that specifically target SMEs and individuals, although this is capped at S$180,000 (US$134,000) per framework, over a three-year period. The framework is targeted for SMEs or individuals who must have annual revenue of no more than S$100 million (US$74,500,000) and for loan sizes no larger than S$20 million (US$14.9 million).
• Other green and sustainability-linked frameworks (tier 2) — MAS will defray up to 60 percent of other green and sustainability-linked frameworks that fall outside the scope of the frameworks set for SMEs and individuals. This is capped at S$120,000 (US$89,500) over a three-year period.

The specific expenses covered are for:

• Developing the loan framework;
• Obtaining any external reviews; and
• Reporting on the impact of the loans.

Who is eligible to apply?

This track is open to all Financial Sector Incentive companies who want to apply for any green and sustainability-linked loans that fall under the following criteria:

• The assessment of the green and sustainability-aspects of the loan work must be done in Singapore;
• More than 50 percent of the advisory assessment work must be attributed to Singapore-based providers; and
• The design of the framework must be done in Singapore.

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