HSBC Singapore has successfully piloted the Green & Sustainable Trade Finance and Working Capital (GTF) Framework, a guide for banks and financial institutions in extending green financing to buyers and suppliers, announced by the Monetary Authority of Singapore.
The GTF Framework adopts a principles-based approach for banks to identify and assess eligible green trade finance transactions, and provides specific guidance on recommended industry certifications for trade finance activities to qualify as green.
“Climate change requires all areas of society to do their part,” said Iain Morrison, head of global trade and receivables finance at HSBC Singapore. “The GTF Framework sets in motion a move towards a clear, unified methodology to qualify trades and working capital loans as sustainable, and represents a tangible blueprint for financial institutions to assess, monitor and report on how ‘green’ a company’s activities are.”
The framework sets out that the bank’s customer’s use of the funds must meet any of the environmental objectives in the Green Finance Industry Taskforce (GFIT) Taxonomy . These criteria currently include climate change mitigation, climate change adaption, protection of biodiversity and promoting resource resilience.
The GTF framework then guides lenders on how to perform suitability assessments and the documentary evidence needed to qualify the underlying activities as green. The documentary evidence could come in the form of a recognised industry certificate, government license, or accepted third-party assessment that shows the greenness of the activity or the goods.
HSBC Singapore has successfully piloted two transactions under the framework. In the first one, HSBC issued an import letter of credit facility to Swelect, a Singapore-based procurement hub of one of India’s leading solar photovoltaic modules manufacturer to facilitate the purchase of solar PV components.
In accordance with the lending criteria set out by HSBC, the solar PV components procured by Swelect must carry certification from one of the world’s leading testing service providers, and they will need to keep the certification in full force and effect under the green facility.
In the second transaction, HSBC extended a green trade loan to World Metals, a Singapore-based SME in the metal recycling industry. World Metals was seeking additional working capital to finance the refinery and recovery of precious metal from e-waste.
Based on HSBC’s lending criteria, World Metals must continue meeting the requirements of a Singapore accredited independent third-party certification provider and a waste collection and disposal license when carrying out the recycling and recovery of non-ferrous precious metal and electronics waste.