Sustainable financing for SMEs set to go up by 50% this year to over $3 billion: OCBC

The loans will cover over 600 SMEs across Singapore, Malaysia and Hong Kong. ST PHOTO: ALPHONSUS CHERN

SINGAPORE – The total amount lent by OCBC Bank to small and medium-sized enterprise (SMEs) for sustainable projects is set to rise by 50 per cent year on year, reaching over $3 billion by end-2022.

These loans will cover over 600 SMEs across Singapore, Malaysia and Hong Kong, with the number taking up such loans increasing by three times year on year. About 500 SMEs come from Singapore.

Around half of such loans taken up here relate to the built environment, and another quarter are tied to renewables and energy efficiency.

The loans cover nine green project categories, including clean transportation, green buildings and renewable energy.

The bank launched the OCBC SME Sustainable Finance Framework in November 2020 to make it simpler and less costly for firms to get started on sustainability plans. Some challenges that SMEs face include costs, lack of expertise, and limited resources, said Mr Linus Goh, head of global commercial banking, on Tuesday.

Though still in its early stages, OCBC is also pushing this framework to its regional markets. For instance, in Malaysia, renewable energy – particularly solar energy – is the top sector.

Over the past year, OCBC has noted a shift by SMEs in how sustainability is viewed.

Previously, sustainability was thought of as a good to have, and SMEs were mainly motivated to transition over compliance requirements, Mr Goh noted.

However, in the past year, SMEs now see sustainability as a business risk consideration, where it is a key driver of business viability and long-term survival.

Mr Goh cited the example of Yeap Transport, a bus fleet management company that specialises in transporting school-going children. As transport forms a large part of a school’s carbon footprint, schools are increasingly monitoring how bus operators tackle the issue.

“In the normal assessment of things, you would not expect Yeap Transport to have to comply to any green requirements, or lose a client. However, they serve the foreign schools, and these schools are ahead of the curve and want Yeap Transport to meet the standards of an electric vehicle (EV) bus.

“So Yeap is now confronted with the issue: Either step up to meet the standards of an EV bus or lose a client,” he said.

Yeap Transport currently manages a fleet of over 450 buses, where more than half are Euro 6 zero-emission diesel types. It also aims to use 100 per cent renewable energy for its operations by 2040, and have an over 90 per cent electric fleet by 2050.

“Business owners can no longer kick the idea of sustainability down the road,” added Mr Goh who expects green loans to grow at a similar pace in 2023.

OCBC is also embarking on more industry partnerships to extend more self-help emissions measurement and reporting tools to SMEs, which may take a green loan for a particular facility but will still need to continue monitoring ongoing emissions.  

One example of such a tool would be the carbon and emissions recording tool by Global Compact Network Singapore. Firms can use it to compute their emissions data for energy, water and waste.

Oil and gas engineering services provider Dyna-Mac Holdings used this data to guide its targets, one of which is to reduce its carbon emissions by 25 per cent within five years.

OCBC’s framework is supported through the Monetary Authority of Singapore’s Green and Sustainability-Linked Loan Grant Scheme.

Green loans help finance new or existing projects, while sustainability-linked loans provide price incentives for borrowers to achieve eco-friendly performance targets. Dyna-Mac was the first SME which OCBC extended a sustainability-linked loan to.

To meet its sustainability goals, Dyna-Mac changed from diesel power to electrical power for its operations, switched to more energy-efficient equipment such as LED lights for its facilities, and supplemented its power needs with renewable energy through the installation of solar panels.

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