HSBC launches Singapore’s first green loans for SMEs
Reduced time, complexity and costs provide straight-forward route to sustainability
In a first for the Singapore market, HSBC Singapore has launched the HSBC SME Green Loan, which aims to provide small and medium-sized enterprises (SMEs) with the financing to develop sustainable projects by using the city’s existing green certifications.
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 - Singapore Green Labelling Scheme (SGLS) and eco-certification scheme; Building and Construction Authority - Green & Gracious Award, and Green Mark Scheme (GoldPLUS and Platinum); Singapore Green Building Council – Product and Services certification schemes; and 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.
The loan scheme is available on a term basis at a minimum limit of US$350,000, denominated in either Singapore or US dollars.
“Singapore is an internationally recognised hub for green finance, underpinned by the development of market-leading frameworks and incentives,” Li Lian Ng, HSBC Singapore’s head of business banking. “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.”
While green lending has boomed in recent years, with gross global issuance of green loans increasing 30% to US$60 billion in 2018, green financing has traditionally been used by large corporates due to the deep due diligence associated with the assessment of a loan’s use of proceeds.
Corporates generally develop a green finance framework to demonstrate their compliance with GLPs. The framework, supported by external verification, articulates the corporate’s environmental objectives and governance process around obtaining and managing green financing. It also provides reassurance to lenders and stakeholders outlining a business’s accountability and true sustainability intentions.
Given the cost and time associated with such frameworks, SMEs have typically been unable to access green finance. But the loan scheme removes this hurdle by leveraging Singapore’s globally recognised sustainability certifications and issuing all of these green loans in compliance with GLPs.
“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,” points out Ng.
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