In June 2023, the Monetary Authority of Singapore (“MAS“) announced several initiatives to support sustainable and credible transition financing solutions. We highlight some of those key initiatives below.
Supervisory Expectations for Financial Institutions’ Credible Transition Planning
On 8 June 2023, MAS announced that it will set supervisory expectations to direct the transition planning processes of financial institutions (“FIs“) in order to facilitate credible decarbonisation efforts by their clients and plans to issue a consultation paper later this year.
MAS’ guidance on transition planning will cover the FIs’ governance frameworks and client engagement processes to manage climate-related financial risks. The guidance will enable transition in the real economy towards net-zero. MAS has emphasised that FIs should not indiscriminately de-risk from particular sectors and should instead carefully assess their clients’ transition plans and provide the needed financing for transition where the plans are credible.
Establishment of the Singapore Sustainable Finance Association
MAS, in collaboration with the financial industry, will set up the Singapore Sustainable Finance Association (“SSFA“). The Association of Banks in Singapore is leading the coordination and setting up of the SSFA. The SSFA will include representatives from financial institutions, financial industry associations, relevant corporates and service providers such as ESG rating agencies.
The SSFA will build upon the Green Finance Industry Taskforce’s strong achievements and continue to cultivate a vibrant ecosystem for green and transition finance in Singapore. The initial focus of the SSFA will be on initiatives to scale voluntary carbon markets, transition finance, and blended finance.
Enhancing the Sustainable Loan Grant Scheme and Sustainable Bond Grant Scheme to Include Transition Instruments
As part of MAS’ Finance for Net-Zero Action Plan, MAS has enhanced and extended the Sustainable Loan Grant Scheme and Sustainable Bond Grant Scheme to include transition instruments. The schemes promote the adoption of internationally-recognised standards, principles and taxonomies.
Sustainable Loan Grant Scheme (“SLGS“)
The extended and enhanced SLGS assists qualifying borrowers to defray eligible expenses of engaging independent service providers to validate the sustainability credentials of sustainable and transition loans.
A summary of the scheme’s key criteria is highlighted below:
Grant Criteria | Details |
Qualifying Borrower (“QB”) | Company (including international organisations but excluding sovereigns) or FI based onshore or offshore. Alignment to international disclosure frameworks and standards is strongly recommended |
Qualifying Instruments | Green, Social, Sustainability, Sustainability-Linked and Transition Loans |
Qualifying Loan Criteria | Loan tenure of at least three years Loan size of at least S$20 million |
External Review Requirements | Green, Social, and Sustainability Use of Proceeds Loans:
Transition Use of Proceeds Loans:
Sustainability-Linked Loan:
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Revenue |
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Eligible Expenses | Costs incurred by the QB to engage service providers for the development of a loan framework or SPTs, pre and post loan origination external review (excluding ESG ratings services) or reporting on loan use and expected impact, or SPTs impact |
Per Loan Cap | 100% funding on all Eligible Expenses capped at the lower of either S$100,000 where issuer has not complied with any internationally-recognised disclosure standards, or S$125,000 where issuer has complied with the standards |
Per Borrower Cap | Capped at a maximum of two instruments |
Funding Period | Three years from the applicant’s loan origination date |
Applicants should submit their applications by no later than three months after the origination date.
By way of background, MAS launched the Green and Sustainability-Linked Loan Scheme (“GSLS“) on 1 January 2021. The GSLS has two tracks: Track A (Green & Sustainability-Linked Loans) and Track B (Green & Sustainability-Linked Loan Frameworks). MAS will discontinue Track B after its expiry on 1 January 2024. For more details on the GSLS, click here for our earlier Legal Update (November 2020).
Sustainable Bond Grant Scheme
Under the extended and enhanced Sustainable Bond Grant Scheme, MAS is offering a grant to qualifying issuers of eligible green, social, sustainability, sustainability-linked and transition bonds to help issuers defray costs incurred in respect of external reviews to assess alignment of bonds with internationally-recognised standards, principles and taxonomies.
A summary of the scheme’s key criteria is highlighted below:
Grant Criteria | Details |
Qualifying Issuer | First time and repeat green, social, sustainability, sustainability-linked and transition bonds |
Qualifying Issuance |
o Sustainability-linked bonds: Post-issuance external review done annually for the first three years or till the tenure of the bond o Transition bonds: Developed and publicly disclosed entity-level transition plan and the use of proceeds from the issuance demonstrates alignment with the transition category under the Singapore Asia Taxonomy or a comparable internationally recognised taxonomy
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Eligible Expenses | Costs incurred in respect of the independent external reviews undertaken based on applicable internationally-recognised principles, standards or guidance |
Per-issuance Cap | Cap of up to S$125,000 or 100% of the eligible expense per qualifying issuance |
Applicants should submit their applications by no later than three months after the issue date.
Both schemes will run until 31 December 2028. Interested parties can write to fsdf@mas.gov.sg to obtain the application form.
Click on the following links for more information (available on the MAS website at www.mas.gov.sg):
