Wednesday, 19 June 2024

HSBC launches Singapore’s first green loan for SMEs

5 min read

 HSBC launched its green loan in Singapore, providing small and medium enterprises (SMEs) with finance to develop sustainable projects by utilising existing ‘green’ certifications.

A first for the Singapore market, the green loan will draw on existing certifications from Singapore industry authorities to certify the validity of specific green projects or assets, instead of the externally reviewed bespoke Green Finance Frameworks used by corporates.

By doing so, the loan reduces the time, complexity and cost typically associated with applying for green finance, providing Singapore’s SMEs with a straightforward route to a sustainable future.

HSBC will accept applications to finance eligible green projects from businesses holding the following industry certifications:

  • Singapore Environment Council (SEC) - Singapore Green Labelling Scheme and eco-certification schemes 
  • Building and Construction Authority - Green & Gracious Award and Green Mark Scheme (GoldPLUS and Platinum) 
  • Singapore Green Building Council – Product and Services certification schemes 
  • Green-e - Renewable Energy Certification 

The certifications help determine the valid use of proceeds of a loan, which is a core component of the internationally recognised Green Loan Principles (GLPs). This could include the purchase of greener equipment, development or production of sustainable or recycled products, construction or renovation of green buildings or the purchase of energy-efficient assets.

As further certifications are developed in Singapore, HSBC may look to expand its list of accepted certifications. 

The Green Loan is available to qualifying business banking customers of HSBC Singapore, and will be issued on a ‘term’ basis at a minimum limit of $350 thousand, denominated in either SGD or USD. Applications will be subject to HSBC’s usual credit review process.

Li Lian Ng, head of business banking at HSBC Singapore, said, “Singapore is an internationally recognised hub for green finance, underpinned by the development of market-leading frameworks and incentives. By utilising these well-developed certifications, we are drawing on the best of Singapore’s sustainability credentials to plug the financial gap felt by SMEs who want to start on a green transition.”  

Isabella Huang-Loh, chairman of Singapore Environment Council, said, “SEC’s Green Label is one of the most established ecolabels certified to international best practices in compliance with ISO 14024 and ISO 17065:2012. SEC is also accredited by the United Nations Environment Programme for our environmental programmes, such as our Green Labelling Scheme, which is accepted in over 42 countries.”

On the other hand, Jen Teo, executive director at Singapore Environment Council, said, “We all have a role to play in climate action. The new green loan will broaden climate action initiatives, lending SMEs the impetus to better manage resources efficiently that translates to savings, while minimising negative impact to the environment. SEC’s Green Label follows a set of criteria that assess products and construction materials with environment and health in mind.”

Drawing on market leading certifications 

While green lending boomed in recent years, with gross global issuance of green loans increasing 30% to $60 billion in 2018, green financing has traditionally been utilised by large corporates due to the deep due diligence associated with the assessment of a loan’s use of proceeds. 

All HSBC green loans are issued in compliance with the GLPs, which set out four key pillars formalising what constitutes a green loan and voluntary recommended guidelines for businesses seeking to utilise them.

Corporates generally develop a Green Finance Framework to demonstrate their compliance with the GLPs. A Green Finance Framework, supported by external verification, articulates the corporate’s environmental objectives and governance process around obtaining and managing green financing. The frameworks provide additional reassurance to lenders and stakeholders to outline a business’ accountability and true sustainability intentions.

Given the cost and time associated with the frameworks, SMEs were typically unable to access green finance, therefore preventing them from taking forward their ambitions to shift to greener business practices. 

The HSBC SME Green Loan is designed to remove this hurdle while continuing to align with the Green Loan Principles by leveraging Singapore’s globally recognised suite of sustainability certifications, marking a step-change in the way SMEs can apply for funding. 

SMEs seeking simple route to first-step sustainability 

The need for SMEs to shift towards more sustainable operations is critical if Singapore is to achieve a wider societal shift, given the 220,000 companies make the lion share of corporate Singapore.  

Businesses – both large and small – are waking up to the significance that sustainability will play in their business models. HSBC’s Navigator survey of 2019, including the views of 200 Singapore firms, of which half are SMEs, revealed that 64% of Singaporean companies believe they have a role to play in delivering the UN’s Sustainable Development Goals.

Moreover, looking ahead, respondents claimed they are struggling to find the time and funding needed to advance their sustainability agendas, looking to governments and regulators for support. 

“Green finance has been the preserve of large companies, yet SMEs want to play their own role. Accessibility and simplicity are key to supporting them in opening the green finance door,” Li Lian Ng stated.

“Achieving critical mass requires three things: a common understanding of what is green, comparable and verified information on the risks and opportunities this presents to borrowers and lenders as well as the ability to make informed decisions based on such data. Drawing on Singapore’s established set of accreditations, this Loan is a starting block providing consistency and accessibility for SMEs to begin their shift to a sustainable future,” Ng continued.

Re-disseminated by The Wealth and Society

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