Supporting SMEs in their journey towards building a sustainable business

OCBC's unique Sustainable Financing Framework is designed to help small companies expand their green footprints


Small to medium-sized enterprises (SMEs) must be part of the conversation regarding sustainability. After all, they are the "drivers of green and inclusive growth", according to a 2018 white paper by the Organisation for Economic Co-operation and Development.

Shouldering equal responsibility towards the economic, social and natural environments as large corporations, SMEs are a force to be reckoned with, especially since they make up 99 per cent of Singapore's enterprises.

According to the Department of Statistics, there were 273,100 enterprises in 2019.


Conducting businesses more sustainably

When SMEs uphold strong sustainable practices and standards, these can lower cost of capital, resulting in better operational performances.

In turn, investor demands and customer expectations are met, boosting the economy in the long run while contributing to global efforts towards sustainable development - a goal Finance Minister Heng Swee Keat mentioned during the 2017 Singapore Apex Corporate Sustainability Awards.

Sustainable practices may include policies on emissions, waste management and water efficiency, building ethical supply chains, and developing environmentally friendly products and services. And SMEs may choose to seek sustainable finance to fund sustainability projects in these areas.

For instance, whether an SME is operating a green business or remodelling the current business model to be more sustainable, it can leverage OCBC's SME Sustainable Financing Framework to achieve its goal.

This framework is validated by Vigeo Eiris (a Moody's affiliate) as robust and aligned to the four core components of the Green Loan Principles. Such Second Party Opinion validates the quality of green financing and ensures that the solutions meet market expectations and industry best practices.

This will also complement the Monetary Authority of Singapore's (MAS) new Green and Sustainability-Linked Loan Grant Scheme launched last month.

Green loans can help finance new or existing green projects, while sustainability-linked loans may provide price incentives for borrowers to achieve sustainability targets.


SMEs' role in enabling sustainable development of Singapore and the region

SMEs can provide technology, products and services for sustainable projects in areas such as renewable energy, green buildings, sustainable water and waste management, for Singapore and the region.

To date, SMEs here have worked on other technology, products and services, with the cleantech sector having some breakthroughs, as previously reported by The Straits Times. For instance, a hybrid solar photovoltaic system based on top-cooling technology, and the use of thin, flexible organic solar films on building facades under tropical climate were pioneered.

Not only will such endeavours cater to projects and businesses in Singapore and the region seeking to build sustainable processes, they can also unlock new economic opportunities and jobs, which would be beneficial in post-pandemic recovery plans.

In her keynote address at the Singapore Dialogue on Sustainable World Resources last month, Minister for Sustainability and the Environment Grace Fu said the sustainability sector is expected to create 55,000 jobs in the next decade, with 4,000 created in 2021. These include skilled roles in the high-tech agriculture and aquaculture industry, waste management, and public hygiene.

Also, going green could bring up to US$1 trillion (S$1.3 trillion) in annual economic benefits to South-east Asian economies by 2030, global management consulting firm Bain and Company reported in November 2020.

In particular, greater investments in renewable energy, reduced consumption and better waste management, less damaging crop growing practices and improved urban planning are among the areas that could bring new growth opportunities for economies, and these are also where SMEs can contribute.


How OCBC's SME Sustainable Financing Framework helps drive success

SMEs growing in these areas can look towards OCBC's SME Sustainable Financing Framework, which includes its sustainable finance offering for SMEs, regardless of their green certification status. The framework is designed to help SMEs capture emerging opportunities in renewable energy and green buildings sectors, as well as other sectors that contribute to sustainable development.

OCBC's framework, which qualifies for the MAS Green and Sustainability-Linked Loan Grant Scheme, will enable SMEs to access sustainable financing of up to $20 million, covering green projects related to categories such as energy efficiency, green buildings, and pollution control, among others.

With a strong foothold in the SME space, OCBC aims to promote and influence SMEs to adopt sustainable practices and enable change in industries through the services that they bring in alternate energy, water management and more.

OCBC also aspires to expand the scope of projects and markets that the Framework can support, especially to Indonesia and Malaysia where micro SMEs occupy a large part of the economy.

OCBC bank head of global commercial banking Linus Goh previously told The Straits Times: "This framework is designed to make it simple for SMEs to access green financing for their businesses and projects, without the complexity and cost of establishing a customised framework for each company.

Financing under the framework includes solutions such as green loans, green letters of credit and green banker's guarantees, to support sustainability projects, in eight categories including clean transportation, green buildings, and energy efficiency, among others.


Why more companies need to make the green shift

While MAS and financial institutions such as OCBC are encouraging firms across different industries to transition to more sustainable practices through green and sustainability-linked loans, SMEs still face challenges.

Besides concerns about cost and the lack of resources, these companies also view sustainability and profitability as conflicting business goals, making them resistant to change.

But government and industry-led efforts are reinforcing the message with SME-focused initiatives. For instance, Enterprise Singapore launched a Sustainability Open Innovation Challenge in 2019, with industry leaders and government agencies to create innovative solutions with SMEs as well as startups.

As OCBC's Mr Goh previously said, the aim is to help SMEs accelerate their sustainability plans, through its framework for instance, such as those "enabling the change of industries and businesses as service providers in sustainability, and those across all industries which are beginning to evaluate and adopt sustainability practices in their businesses, directing investments into green businesses, technology and infrastructure".

To start your sustainability financing journey, click here.

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