SINGAPORE: Sustainable finance isn’t as complex as it seems, OCBC tells SMEs.

As published on businesstimes.com.sg, Wednesday 12 April, 2023.

Most small and medium-sized enterprises (SMEs) in Singapore can obtain sustainable loans without green certification, as banks will try to accommodate their limited resources, said OCBC global commercial banking executive Iris Ng on Wednesday (Apr 12).

Ng, who is business head of middle market for global commercial banking at OCBC, said that the bank has in the past two years accorded green loans to more than 500 SMEs, and only one in three of them provided a green certificate to validate the green criteria.

The vast majority qualified for a green loan without a certificate, because the bank took an approach in which it issued such loans by understanding applicants’ business activities, examining their product features and contract scope, and looking at the government grants that they have tapped.

“We even pre-qualify companies which have accessed government grants that are related to sustainability,” Ng added, speaking at a panel discussion in a conference organised by the Institute of Singapore Chartered Accountants (Isca).

“We deem the government to have done the due diligence. They would have set certain sustainability outcomes on the grantholder. Therefore, the bank is not going to burden the company further by setting a second-layer check,” she added.

Ng said that this was possible through the SME framework for sustainable finance that OCBC launched two years ago for green loans under S$20 million. The framework was created to lower the barriers of entry – such as high consultancy fees – for a tailored green-finance framework.

Bigger companies, such as Hongkong Land and Ascott Residence Trust, have developed their own frameworks to govern their green-finance transactions in recent years.

With OCBC’s SME framework, corporates “do not need to worry about consultancy fees that they have to incur in order to set up their own corporate framework”, she said. “They also do not need to worry about having to apply for a certain green certificate before they can get a loan out of OCBC,” she added.

At the conference, Isca launched two guides, including a finance guide to provide SMEs with a road map to access opportunities in green and sustainable finance, to fund their sustainability projects.

Addressing the impression that sustainable finance is too complex for SMEs, Ng said: “Most of the time, people associate it with being too difficult to achieve, and that ‘it is not for me unless I have certain green certificates or certain government support’.”

She also noted that besides applying for loans, SMEs can also get support to go green from Enterprise Singapore, which had in October 2021 launched the “very encompassing” Enterprise Sustainability Programme, which covers capability building and grant schemes.

For instance, companies can sign their employees up for courses at a fee that is so heavily subsidised that “even your kid’s tuition fee can be higher than that”, Ng said.

SMEs can also get up to 50 per cent of their external consultancy costs subsidised, should they require help to devise a sustainability strategy, adopt certain sustainability standards or create sustainable products for commercialisation, she added.

Meanwhile, speaking at the same panel was Lim Ah Cheng, the chief executive officer of engineering company Dyna-Mac Holdings, who remarked that obtaining a sustainability-linked loan (SLL) is worth the initial hassle.

This is because taking out an SLL from one bank opens up avenues for companies to obtain similar loans from other financial institutions, he said.

In 2020, the mainboard-listed company, which fabricates topside modules and structures for the offshore oil and gas industry had, under its financier OCBC’s advice, committed to targets to reduce its carbon emission intensity by 25 per cent in five years.

The plan led the company to use LED instead of fluorescent lighting in its facility, and to switch from diesel power to electrical power in its operations, among other changes.

OCBC incentivises Dyna-Mac by converting its credit facility into an SLL, with which Dyna-Mac can secure lower interest rates when sustainability targets are met.

Lim said: “You do it one time, you don’t have to go to that one bank. With the same thing, you can get an SLL from OCBC, UOB, wherever, because the matrix is more or less the same.”

And it is not just about the benefits. The focus on sustainability is also a question of “immediate survival”, he added.

He shared about a particular client – which he did not name – that had been very adamant about its suppliers hitting certain sustainability targets by 2025.

“2025 is in two years. If you don’t have (the plans in motion), you will not be able to participate in their project. That’s quite scary. If you are not able to participate in the project, you are not in the game,” he said.

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