Promoting Green Financing amongst SMEs

Ms He Ting Ru asked the Prime Minister (a) whether the Government tracks the take-up rate of green financing loans and products for SMEs; and (b) what are the plans to make green financing more accessible to SMEs.

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. Singapore corporates also borrowed SGD 10.2 billion through green and sustainability-linked loans1 in the same period. While green and sustainable financing has nearly tripled from 2018 volumes2, we are still at an early stage of this journey, as is the case internationally. The green share of total loan and bond transactions3 in Singapore remains modest at less than 5%, reflecting the significant opportunity for growth.

MAS does not have data on SMEs' take-up of green and sustainability-linked loans. But we do know that Singapore-based banks have been stepping up on such lending. Notable examples include a SGD 27 million ten-year sustainability-linked loan structured by DBS to Chew’s Agriculture in 2019; and a SGD 14 million green loan from UOB to LYS Energy Group, a home-grown independent solar power producer, earlier this year.

We are taking further steps to promote green and sustainability-linked loans to SMEs. One possible solution is to develop lending frameworks that provide simplified processes and set out clear standardised criteria for borrowers. With these frameworks, there would be no need to engage external reviewers to develop, verify and maintain customised 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.

MAS will also help borrowers defray the cost of customised green and sustainability-linked loans. Later this year, MAS will launch a Green and Sustainability-Linked Loan Grant Scheme which will be open to SMEs and other corporates4. 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.

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.