On 24 November 2020, the Monetary Authority of Singapore ("MAS") announced the launch of its grant scheme for green and sustainability-linked loans ("SLLs"), effective as of 1 January 2021. The Green and Sustainability-Linked Loan Grant Scheme ("GSLS") supports corporates' green and sustainable financing by defraying the expenses of engaging independent service providers to validate the green and sustainability credentials of the loan. It also encourages banks to develop green and sustainabilitylinked loan frameworks to make such financing more accessible to small and medium-sized enterprises (SMEs).
Green loans are loans whose proceeds are earmarked to finance or re-finance eligible 'green' purposes, in line with the Green Loan Principles, as agreed between lender and borrower. SLLs on the other hand, are loans for general purposes, which incentivise the borrower to meet agreed sustainability performance targets, in line with the Sustainability-Linked Loan Principles.
Under the GSLS:
1 Corporations can receive up to $100,000 per loan of the expenses payable to engage independent sustainability and advisory service providers for developing green and sustainability frameworks and targets, obtaining external reviews, and/or procuring a report on the sustainability impact of the proposed green and SLLs;
2(a) Banks can receive up to 90% of the expenses (capped at $180,000 per framework) incurred to develop frameworks specifically targeted at SMEs and individuals. Expenses that are covered under the scheme includes the costs of engaging independent sustainability assessment and advisory service providers to develop such frameworks, obtain external reviews, and report on the allocated proceeds of loans originated under the framework.
2(b) Banks can receive up to 60% of expenses incurred (capped at $120,000 per framework) to develop frameworks for green and SLLs not targeted specifically at SMEs and individuals.
More information on the scheme's conditions, including the eligible applicants, eligible loans and frameworks, and eligible expenses, can be found here.
The latest initiative to be introduced under the MAS' Green Finance Action Plan to support Singapore's efforts in becoming a sustainable nation and to facilitate Asia's transition to a sustainable future, the GSLS complements the Sustainable Bond Grant Scheme ("SBGS"), which helps defray the expenses incurred by bond issuers for engaging external reviewers to ascertain their green, social and sustainability bond status. MAS also announced the extension of the scope of the SBGS to include sustainability-linked bonds. The enhanced SBGS will now also cover the post-issuance costs of engaging independent sustainability assessment and advisory service providers to obtain external reviews or reports for bonds under the scheme.
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