HSBC sows sustainability seeds with green loans for SMEs
Previous green loan initiatives aimed at large corporates and multinationals
20 Mar 2020 | Tom King

The Asset recently met with the architects of HSBC Singapore’s new green loan for small and medium-sized enterprises (SMEs), a first for the Singapore market, with the aim of drilling into the details and discovering the bank’s aspirations for this sustainable and socially responsible product.

The green loan initiative leverages existing certifications set in place by Singapore industry authorities, instead of using the externally-reviewed bespoke green finance frameworks used by corporates, to guarantee the validity of green projects or assets.

By doing so, the new green loan scheme reduces the time, complexity and cost typically associated with applying for green financing.

Li Lian Ng, HSBC Singapore’s country head of business banking, says that despite the current market turmoil she has already received a strong response for the new green instrument and a rapidly growing number of enquiries.

Firms attracted to the new product include pure play SMEs with 100% of their business already green, and the rest made up of traditional SMEs looking to reduce their carbon footprint or replace obsolete equipment with greener contemporary adaptations.   

Unlike the recent roll-out by HSBC of its green deposit scheme, which was initially launched in the UK and Singapore with a view to expanding it to other markets, the new SME loan initiative is not a blueprint for other jurisdictions to introduce.

“While the rationale of this product is replicable to other geographies, it will be up to them to see if they have the appropriate accreditations in place to meet the green standards,” points out Frances Chen, HSBC Singapore’s head of corporate sustainability. “And the SME ecosystem is quite different in each country.”

The proceeds of the loan could potentially be used outside of Singapore, according to Ng, if the investment location meets all of the industry certifications in Singapore. But the funds will only ever be disbursed to the company in Singapore, she adds. 

The SMEs could be said to have propelled this initiative, making it a bottom-up driven scheme. SMEs were not really catered to in this area as most bespoke green finance solutions until now have been the domain of the large corporates and multinationals.

But there are growing demands on SMEs as suppliers to meet increasingly stringent green standards imposed on them by their larger clients. As well, government tenders, a sizeable source of business for SMEs, are increasingly placing more rigid environmental, social and governance (ESG) requirements on suppliers.

Employees of SMEs, as well, are putting pressure on business owners to make their work environments healthier, cleaner and more sustainably oriented.

HSBC also sees great potential for the new green instrument in the number of next-generation business owners who are soon to inherit and run their family SMEs. This generation is more ecologically and socially aware and understands the long-term benefits of greening its SMEs. 

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