United Overseas Bank (UOB) has enhanced its sustainable financing framework by incorporating the Singapore-Asia Taxonomy, saving small- and medium-sized enterprises (SMEs) time and resources while granting easier access to sustainable financing.

According to an April 15 announcement, UOB is the only Singapore bank to incorporate the Monetary Authority of Singapore’s (MAS) Technical Screening Criteria (TSCs) of the Singapore-Asia Taxonomy into all of its six sector-focused sustainable financing frameworks. 

The six frameworks are circular economy, green buildings, sustainable cities, sustainable food and agribusiness, sustainable trade and transition finance. According to the bank, these frameworks are also independently validated by independent consultant ERM to ensure credibility.

UOB says it has taken a “nuanced approach” to ensure that sustainable financing continues to remain accessible.

This starts with SMEs involved in the value chains that provide “important goods and services in sustainable assets, activities, projects and products”. These firms are now “explicitly” included in UOB’s enhanced frameworks. 

Next, project owners and main contractors seeking financing above a specific threshold will need to provide evidence of their compliance with specific sustainability criteria, says UOB.

Other entities, such as those assessed with “lower risk profiles”, will follow an “attestation-based approach” with “mandatory representations and warranties”, says the bank. 

Among the six frameworks, UOB has also broadened its transition finance framework to cover not only the Singapore-Asia Taxonomy’s “amber” TSCs, but also specific measures for a “just and orderly transition” in the oil, gas and chemicals sector.

By establishing “defined sunset dates”, UOB says these companies have the time and support needed to pivot their business models and shift towards lower-carbon solutions.

Finally, UOB will also look beyond the Singapore-Asia Taxonomy and draw on “globally recognised frameworks”, including the EU Taxonomy, Australia’s Sustainable Finance Taxonomy (which is in-consultation) and the Climate Bonds Initiative Taxonomy. The bank believes this ensures a “comprehensive and forward-thinking approach”.

MAS launched the Singapore-Asia Taxonomy in December 2023. It was the world’s first taxonomy to pioneer the concept of a “transition” category, setting out detailed thresholds and criteria for defining green and transition activities that contribute to climate change mitigation across eight focus sectors.

The Singapore-Asia Taxonomy also covers managed coal phase-out, which aims to provide a credible standard to facilitate the early retirement of coal-fired power plants, aligned with a 1.5°C decarbonisation pathway for the global power sector.

Last month, MAS published a 20-page information note outlining how banks and corporates have adopted the Singapore-Asia Taxonomy, in hopes of encouraging wider use.

UOB said then in that March 18 document that all new and refinanced sustainable financing from July 1 will adhere to its enhanced frameworks. 

Lim Lay Wah, group head of sector solutions and global financial institutions group, UOB, says the move strengthens the bank’s sectoral financing frameworks to offer SMEs “clear, credible and actionable solutions”. 

“Through these enhanced frameworks, we deepen our impact, fostering a just transition where no business is left behind. Sustainable finance is pivotal to accelerating Asean’s decarbonisation efforts, presenting both an environmental imperative and a significant economic opportunity. Supporting decarbonisation across the entire value chain is critical for achieving meaningful emissions reductions. We remain committed in delivering innovative and strategic financing solutions, empowering businesses across the region to thrive in a sustainable, low-carbon economy,” adds Lim. 

UOB provided $58 billion in sustainable financing last year. The bank claims it has supported 580 SMEs in their sustainability journey, financed over 175 green buildings, enabled the development of 20 green data centres and facilitated $7 billion in sustainable trade financing for agri-commodities and responsible supply chains. 

UOB jumps 2.67% at 9:52 am, Apr 15th.