Green Lending – A Sustainable Finance Goal for SMEs and startups

Green Lending – A Sustainable Finance Goal for SMEs and startups

Green Lending – A Sustainable Finance Goal for SMEs and startups

5760 3840 Purnima Madaan

Climate change, forest fires, and extinction of species from the world are just a few signs that mother earth needs help, and she needs it right now. While a lot of NGOs and people on an individual level are coming up with sustainable ideas and ways to reduce pollution, but until the corporates start thinking about the problems the world faces today, a little is going to change. Gladly, several corporates in Singapore have already realized the need to go green and cut down on the waste. As a result, Singaporean companies have come up with innovative ways to generate wealth while promoting, and indulging in cleaner ways to execute business.

How Is Singapore Contributing?

The giants like CapitaLand, DBS Group, and ComfortDelGro have been showing the way to start-ups in Singapore for a long time. These companies are among the five companies that have been recognized by the Dow Jones Sustainability Index (DJSI) as top companies to indulge in green practices in 2019 in the Asia Pacific region. Their ways of doing business and cutting down on the carbon footprint is an ideology that the SME sector can adopt to contribute to a greener world.

The SME sector has learned a thing or two from the west, where sustainable business development has turned into a thought process rather than an idea. For example, UnPackt, Singapore’s first bag-less store, was incepted after the owners saw a video of such a store existing in Europe. UnPackt encourages customers to bring their own shopping bags and uses recyclable containers and glass jars to store groceries. UnPackt has proved that sustainable practices do not bear any additional cost.

Singapore SME contribution in Green Lending
Source: UnPackt

People tend to have the idea that going green requires additional costs but we want to prove that wrong by making our prices affordable.

– says Florence Tay owner of unPACKT

However, not every company can invest in machines and equipment without bearing the additional cost. Especially for the companies that are involved in food and beverages, construction, manufacturing, and transportation, going green comes with a price tag

The Government of Singapore is also coming up with exciting campaigns to promote and spread awareness of sustainable development among its citizens. The Ministry of National Development and the Ministry of Environment and Water Resources of Singapore have joined hands to start a Sustainable Singapore movement that aims to spread awareness about the importance and need to think ‘sustainable’ from day 1. The Sustainable Singapore board promotes five key components that are important for a better tomorrow. These are:

 Sustainable Singapore movement

Zippy MareeUse the eco-friendly mode of transportation, cycle or walk if possible and carpool when you can.

Caring CoraKeeping the country clean and volunteering for environmental causes.

Eco EvaAim for zero waste at home and work, recycle, limit the usage of water.

Smart EddiePractice eco-smart habits, save water, and switch off the appliances when not in use.

Smiley RayReduce carbon footprint, invest in eco-friendly products, and build environment-friendly products and systems.

The Government came out with this movement in 2015 and outlined a vision to build sustainable and livable Singapore. The movement lays down a blueprint that will help its citizens, with the contribution of the SMEs in achieving a greener country and staying attractive to the rest of the world for several years to come.

Loans and Grants for Sustainable Development

The NEA provides financial assistance to the start-ups in Singapore through its broad spectrum of grants and schemes. All of these grants get awarded to the companies that promise to venture into greener practice and promise measurable and significant improvement in the reduction of waste, carbon footprint, and wiser usage of natural resources. A start-up can also use one or more of these grants to reduce its tax liabilities with other Government offices. Some of the notable grants are:

3P Partnership Fund

The grant gets awarded to the companies from People, Private, and Public (3P) sectors to formulate products and practices that promote environmental ownership among the community members. The grant gets used for working in partnerships, promoting environmental ownership and publishing initiatives to reach to the school kids and teaching them the importance of going green. While the program cant use for direct benefits, but it allows the companies to surface and shine as advocates of the environment.

3R Awards

3R Awards is a scheme that encourages companies to reuse and recycle while focusing on initiatives to cut down on the waste. The honor gets awarded in 2 categories: hotels and shopping malls. The hotels get evaluated on the scale of efforts put in to reduce and recycle waste, and promoting best practices of waste management within the hotel industry. For shopping malls, the award gets further divided into two categories: Award for Shopping Mall and Award for Retail Tenants in a Shopping Mall. The assessment is done based on waste management policy followed by the mall/retailer, waste disposal tonnage report, and promoting reusing and recycling practices among the shoppers.

Call for Ideas Fund

The fund gets set in place for projects aimed at solving problems faced by the country about the environment. The problem can be related to the general public, specific industries, the Government, or the state as a whole. The project must talk about expected results, and be inclined with an NEA strategic outcome to be eligible for the fund.

Go Green Lending in Singapore
Source: Pixabay

Green Lending

Green lending is composed of the loans and funds that are issues to corporates who pledge to utilize them in environmental-friendly initiatives. The concept of Green Lending originated in the year 2005 when a major American bank, Wells Fargo, created a specialized banking product that catered to the needs of companies who indulged in sustainable practices. Today, the banks in Singapore have adopted the concept and tailored it to suit the needs of start-ups in Singapore. 

Green Lending in Singapore

Recently, Singapore revealed that it has planned to invest US$2 billion in green funds to emerge as a leader in sustainable business development in Asia. Education Minister of Singapore, Ong Ye Kung, asked the nation to make the “finance green” and use it “drive climate action – mitigation and adapt to climate change” at the opening of the fourth annual Singapore Fintech Festival (SFF) in November 2019. He also stated the Government’s decision to invest heavily in sustainable businesses and awarding business managers who are committed to bringing about a green financial revolution in the country.

Singapore plans to allocate US$100 million to the Green Bonds issued by the Bank of International Settlements. This money will help the bank in financing several green initiatives, globally. The Government will also make Green Lending a mainstream activity by involving major banks and other non-banking financial institutes in various green initiatives. Grants and schemes will be rolled out to encourage the development of environment-friendly infrastructure and supporting services. All these activities will deepen the understanding of climate risks among the various stakeholders of the state, and help in fighting the environmental dangers that Singapore faces today.

Banks in Singapore have already created a framework to lend green loans to SMEs and big corporates for sustainable projects. For example, United Overseas Bank (UOB) has formulated green financial products for the real estate sector. Lucrum Capital and Teambuild Engineering and Construction were the first companies to use UOB’s offerings linked to environment-friendly financing. The companies plan to utilize the funds to construct green buildings in Singapore.

UOB has laid down the eligibility criteria to ensure that SMEs can benefit from the bank offerings. However, the loan can only be used to execute operations that promise measurable green benefits. Interestingly, this is the first time that a bank has created a green loan facility dedicatedly for the real estate sector in Singapore. Earlier, DBS issued an S$3 million loan to CapitaLand, but it was not a green loan. UOB, like other banks, is also planning to roll out similar financial instruments for different industrial sectors.

Why Should an SME Not Ignore Green Lending?

Being a leader in the environmentally friendly forays is one of the most effective ways to build a long-lasting reputation among the consumers. Also, being eco-friendly helps companies in reducing their carbon footprint and the overall running expenses. The large corporates have already realized this, and therefore, they get actively involved in green initiatives. SME sector has been a little slow in reacting to the situation of climate change and hence, the efforts. However, with the difference in the attitude of the Government and the consumers, SMEs must undertake green projects and give back to nature.

Green Loans and grants for sustainability are the best solutions for an SME to finance green initiatives. The eligibility criteria for such products are usually relaxed, and the interest rates are very competitive. Moreover, green loans fall in line with the modern banking theory of developing a sustainable future. Banks realize that enforcing the ‘green’ finances will not only diversify their portfolio, but it will also enable the country to improve its overall stand on the environment, thus bringing in more opportunities for everyone.

Purnima Madaan

Purnima is a digital entrepreneur and likes to share her thoughts on business development and marketing. She likes to watch documentaries, read about customer psychology and review financial products. When she is not busy finding opportunities for her clients, she loves to indulge in fashion magazines and watch movies.

All stories by:Purnima Madaan
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Purnima Madaan

Purnima is a digital entrepreneur and likes to share her thoughts on business development and marketing. She likes to watch documentaries, read about customer psychology and review financial products. When she is not busy finding opportunities for her clients, she loves to indulge in fashion magazines and watch movies.

All stories by:Purnima Madaan