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MAS Launches World’s First Grant Scheme to Support Green and Sustainability-Linked Loans

The Monetary Authority of Singapore (MAS) announced the launch of the Green and Sustainability-Linked Loan Grant Scheme (GSLS) yesterday, which will be effective from the 1st January 2021.

The Loan Grant Scheme aims to support corporates of all sizes to obtain green and sustainable financing by covering the expenses of independent service providers to validate the green and sustainability credentials of the loan.

The grant also encourages banks to develop green and sustainability-linked loan frameworks to make this kind of financing more accessible to small and medium-sized enterprises.

Mr Ravi Menon, Managing Director of MAS, said, “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.”

Green and Sustainability-Linked Loans

Green loans are any type of loan made available exclusively to finance or re-finance, in whole or in part, new or existing eligible green projects.

Sustainability-linked loans are any type of loan which incentivise the borrower’s achievement of ambitious, predetermined sustainability performance targets.

Unlike green loans, there are no restrictions on the use of proceeds for sustainability-linked loans, and they can be used for general corporate purposes.

Green and sustainability-linked loan frameworks refer to frameworks that spell out clear, streamlined criteria for banks to evaluate green and sustainable finance transactions.

MAS to cover expenses for assessment and advisory services for green and sustainability-linked loans

For Corporates

The grant will cover expenses incurred by corporates to engage independent sustainability assessment and advisory service providers to develop green and sustainability frameworks and targets, obtain external reviews and report on the sustainability impact of the loan. MAS will defray up to S$100,000 of these expenses per loan.

For Banks

The grant will cover expenses incurred by banks to engage independent sustainability assessment and advisory service providers to develop frameworks, obtain external reviews, and report on the allocated proceeds of loans originated under the framework. MAS will pay up to 60% of these expenses, capped at S$120,000 for such green and sustainability-linked loan frameworks.

Helping Banks support SMEs

MAS will also cover 90% the expenses incurred by banks to develop frameworks specifically targeted at SMEs and individuals, capped at S$180,000 per framework. This is to further encourage banks to provide greater support to SMEs, which are a key driver of economies, and enable individuals to contribute to the sustainability agenda by integrating sustainability considerations in their financing decisions.

Finance Action plan to promote sustainable development in Singapore and the region

The GSLS is an initiative under MAS’ Green Finance Action Plan, and will support MAS’ aim to develop green and sustainable financial markets and products to support Asia’s transition to a low-carbon future.

The grant will help to channel more financing towards green projects and enhance corporates’ sustainability practices.

To promote the transparency and integrity of green and sustainable financing flows, MAS will require corporates to engage independent sustainability assessment and service providers and obtain independent external reviews on these loans to demonstrate alignment with internationally-recognised standards.

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

The banks’ frameworks feature standardised criteria and processes, which will streamline assessments of green and sustainable lending to corporates, and support the banks’ clients in financing circular economy projects, renewable energy, energy efficiency activities, and promote sustainable supply chain practices; activities that promote sustainable development in Singapore and the region.

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