As at end-2024, OCBC supported close to 4,000 SMEs across the region with total sustainable financing commitments of over $9 billion, increasing over 40% y-o-y.

Oversea-Chinese Banking Corporation (OCBC) extended sustainability-linked loans (SLLs) to over 110 small- and medium-sized enterprises (SMEs) in the region last year, more than four times the 24 SLLs recorded in 2023 and up from just one in 2022. 

About 80% of the SLLs were extended to firms in Singapore, says Linus Goh, head of global commercial banking, with Malaysia, Hong Kong and Indonesia making up the rest. These firms were most commonly from the manufacturing, services and construction sectors. 

While a green loan is project-specific, SLLs require a commitment towards improvements over a period of time. Borrowers can unlock lower interest payments when they achieve certain sustainability performance targets. 

To further scale SLLs, OCBC and Enterprise Singapore (EnterpriseSG) have launched the OCBC SME StartESG Programme to help SMEs obtain a baseline measurement of their sustainability metrics, access expert advice on sustainability practices and take up SLLs with the bank. 

OCBC, which serves one in two SMEs in Singapore, expects 300 of such firms to participate in this programme over the next three years. Naturally, the bank plans to extend SLLs to them. 

Typically, small firms take out loans of about $1 million to $2 million, while mid-sized firms could take out loans of $3 million to $10 million, says Goh in response to The Edge Singapore. “Obviously, if you’re involved in financing commercial property, even for a mid-sized business, that could be quite a significant undertaking, so it’ll be multiple times their typical financing.”

To measure the sustainability performance of the SMEs under this programme, OCBC has partnered EcoVadis, a Paris-headquartered corporate sustainability ratings provider; and ESGpedia, a Singapore-headquartered carbon management solution provider. 

The EcoVadis assessment will review the SMEs’ performance across four themes: environment, labour and human rights, ethics and sustainable procurement; while ESGpedia’s assessment covers greenhouse gas emissions. 

Under the OCBC SME StartESG Programme, EnterpriseSG will support up to 70% of eligible costs for the annual assessment of each SME’s sustainability performance over a three-year period.

According to OCBC, both EcoVadis’ and ESGpedia’s costs are “about the same”. For a small firm with less than 25 staff, for example, the cost of assessments over three years is $1,000, or about $30 a month. EnterpriseSG’s grant is capped at $3,500 for a three-year period. 

After SMEs undergo sustainability assessments, they come up with sustainability performance targets when applying for SLLs with OCBC. The bank then approves these targets before loans are issued, says Goh. 

While OCBC has tried to simplify the SLL application process and remove barriers, business leaders are more receptive to hearing from their peers, says Goh. “When they are confronted with colleagues from the industry who say, ‘Hey, I’ve done it; it’s not that difficult actually’, then it makes things much easier. Otherwise, the perception is that it requires a chief sustainability officer to be appointed… then they tend to be hesitant to take it up. But if you have your peer in the industry saying it’s really not that difficult, then the barriers fall and the momentum comes.”

Sustainable financing

As at Dec 31, 2024, OCBC has supported close to 4,000 SMEs across the region with total sustainable financing commitments of over $9 billion, increasing over 40% y-o-y from $7 billion issued to some 1,200 SMEs as at end-2023. That, in turn, was more than double the amount issued in 2022.

The 2024 figures suggest that OCBC is issuing sustainable loans to a greater number of SMEs, but at smaller loan quantums. Goh says the bank has “deliberately moved deeper” into various industries after issuing sustainable loans to early adopters in the early years. “[Early adopters] are larger companies who maybe had a bit more awareness, a bit more resources to be able to move forward…. We’ve started to move within the value chain [to] the mid- and small-sized players. So, that accounts for a bigger number of SMEs coming in, but with smaller loan sizes.”

OCBC rolled out the online energy performance self-assessment solution SME Energy Efficiency Assessment (SMEEA) tool in Hong Kong and Malaysia last year. Jointly developed with Singapore’s Building and Construction Authority and launched here in 2021, it assesses the energy performance of property projects and facilities within minutes. 

According to the bank, this helps SME leaders better understand their energy consumption and explore green building technologies, which then opens up access to green financing.

“We’re not going to be able to boil the ocean and bring everybody across the line, but we would look for those who have the conviction, [who] have the interest and want to move,” says Goh.

These sustainable loans were issued in accordance with the OCBC SME Sustainable Finance Framework, which was launched in Singapore in 2020 and extended to Malaysia and Hong Kong from 2022. 

The framework makes it “simpler and less costly” for SMEs to access sustainable financing of up to $20 million to accelerate their sustainability plans, says the bank. Designed as a common point of reference, it replaces the need for bespoke frameworks for each loan.

OCBC launched the framework with eight categories: clean transportation, energy efficiency, pollution prevention and control, sustainable water and wastewater management, built environment, renewable energy, eco-efficient and circular economy, and environmentally sustainable management of living natural resources and land use. 

In 2022, OCBC added a ninth category: climate adaptation. According to OCBC, this covers nature-based solutions and engineering services that “enhance adaptive capacity and reduce vulnerability to climate change”.

Aside, the bank launched the OCBC Women Unlimited Programme in Singapore in April 2024, waiving processing fees on loans of up to $100,000 towards start-ups that are less than two years old and are founded by women.

As at Dec 31, 2024, OCBC supported close to 300 women-owned businesses with about $50 million in loan commitments. 

Together with OCBC Indonesia, which has its own programme supporting women-owned SMEs, OCBC has supported close to 1,600 women-owned businesses with over $500 million in loan commitments.

Photo: OCBC