green loan

What You Need To Know About Green Loans and Their Benefits

ESG (Environmental, Social, and Governance) is not empty talk anymore. It is a pressing issue extending to businesses and societies worldwide with urgent needs to improve our global village. One of the projects is using green loans to support small and mediate enterprises to build a sustainable environment for people living in our society and encourage green financing for business improvements.

Green loans are a force to turn businesses into active participants in rebuilding our world through market mechanisms. As sustainability becomes a key concern for various industries and individuals, how do green loan work and what are their benefits? This article will help you know more about them.

What are Green Loans?

Green loans are the financing of eligible green projects contributing to well-being regarding our environmental objectives. Unlike a green bond, a green loan, whose amounts are smaller, must meet four core components of the green loan principles(GLP), though:

1. Use of Proceeds

The uses of the loan proceeds in the finance documents, including research and development and marketing expenses, must be for environmental benefits. The benefits must be measurable and verifiable.

A borrower should state the proportion of green refinancing for a project and its expected look-back period if a green loan is for refinancing.

Furthermore, a borrower must keep the green loan in a separate account trackable if it is a part of a loan facility.

Green loans are available to prioritized projects concerning climate change, natural resources depletion, loss of biodiversity, and air, water, and air pollution.

2. Process for Project evaluation and selection

Green loans should comprise information regarding:

  1. Environmental sustainability objectives
  2. The process of how a project fits into environmental concerns
  3. Factors associated with a project to be identified and managed to deal with the material environment and social risks concerned

3. Management of proceeds

A green loan borrower should keep the proceeds in a traceable dedicated account to maintain transparency and promote product integrity. If there are multiple tranches of a green loan, more than one separate accounts are necessary to track the use of proceeds. Governance procedures should be in place to manage fund allocations

4. Reporting

A borrower should keep information on the use of proceeds up to date annually until fully drawn and subject to material development. Quality and quantity performance measures, including energy capacity, electricity generation, and greenhouse gas emissions, are available with assumptions and methodology for inspection.


What are the Benefits of Green Loans?

Green loans provide benefits in three aspects:

1. Borrower

Sustainability Management: Businesses can enhance management skills in sustainable solutions in risk management structures, strategies, and governance through complying with the green loan principles. In the mid-to-long term, they will improve corporate value in ESG investing.

Broaden Lender Base: Borrowers of successful green loans may attract more green lenders in the future. Newcomers increase market breadth and competitiveness. Borrowers may end up with favourable terms like interest rates and loan periods.

More Funding Options: Businesses using green loans to fund projects like renewable energy can attract more ESG investors. Once viable corporations are profitable through green financing, more ESG funds are willing to invest in such businesses.

2. Lender

Enhanced Corporate Image: Financial institutions can enhance the market’s perception by promoting green financing for profit’s sake. It may increase businesses and stock value.

Improved Sustainability Management: A lender can improve a borrower’s profitability by co-monitoring and improving the sustainability management of a business, which leads to a profit margin and protects the lender’s income source.

3. Environment

Increased Green Efforts: Joint partnerships by lenders and borrowers create additional rewards besides clear environmental benefits. The public’s increasing awareness about greenness transforms into efforts like green buildings or the deposit of more funds into green banks to support ESG businesses.

Rapid Transformation: A 3-side effort accelerates the pace into a green society in which the government, businesses, and citizens can supplement one another in building a better living world.

businessman shaking hands on project approve with cash

Where to Get Green Loans in Singapore?

The Singapore government is the first to globally promote the green financing scheme “ The Green and the Sustainability-Linked Loan Scheme(GSLS).” 

The details of GSLS are as follows:



Corporate applicant

Onshore or offshore corporates or financial institutions

Requirements for a qualified loan

  • A tenure of at least 3 years
  • Minimum amount of SGD20 million or other currencies equivalent
  • New financing

Application period

The loan budget is available.

External review requirement

Green Loan Principles(GLP) compliant. An external review requirement refers to a project complying with GLPs by second-party opinion, verification, certification, or rating of an outside organization.

Bank requirements
  • More than 50% of the gross revenue attributable to banks
  • Loan sustainability advisory and assessment work to be performed in Singapore
Loan sustainability advisory and assessment work

More than 50% of gross revenue due to loan sustainability advisory and assessment services attributable to Singapore-based service providers

Qualifying expenses to be defrayed
  • Developing a loan framework or sustainability performance targets(SPT)
  • External review concerning compliance with GLP by an independent organization pre and post loan origination
  • Attaining an ESG evaluation score
  • Reporting on the loan use and evaluation of impact upon on the SPT achievement or its expected effect
Maximum loan amount and funding period

SGD100,000 or other currencies equivalent for 3 years


What Banks offer Enterprise Financing Scheme (EFS) – Green Loans in Singapore?

Five banks are partnered with Enterprise Singapore – a Singapore government agency to promote EFS-Green loans to corporations working on green projects.

The banks set up their Green and Sustainable Financing Frameworks, approved by the Monetary Authority of Singapore, for second-party approval as criteria for green projects.

Local corporations seeking funding for green projects can apply for a green loan at one of the following 5 banks.

These banks are: 

  1. CIMB Bank Berhad, the Singapore branch
  2. DBS Bank Limited
  3. OCBC Bank
  4. The Hong Kong and Shanghai Banking Corporation (HSBC)
  5. United Overseas Bank Limited

The green loan types covered by the banks are comprehensive, like capital development, fixed assets, trade, projects, venture debt, mergers, and acquisition loans. The loan tenure differs among types but can be up to 15 years.

See Also: Best Banks For Personal Loan and Top Banks with Foreigner Loans


Green loans offer businesses financing for environment-friendly projects. They must meet the criteria of internationally-recognized Green Loan Principles to be qualified. Besides, green loan borrowers must comply with Green and the Sustainability-Linked Loan Scheme (GSLS) or bank-set Green and Sustainable Financing Frameworks to maintain green loan status pre or post-loan origination. Applicants should review various packages for the best one for their situations

Key takeaways

  • Green loans should meet the Green Loan Principles criteria.
  • Borrowers should comply with the regulatory frameworks of the MAS or banks to maintain green loan status before or after loan origination.
  • CIMB’s Singapore branches, DBS, OCBC, HSBC, and UOB, offer green loans besides the Singapore government.

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