On 26 February 2019 the Monetary Authority of Singapore (MAS) announced the expansion of its Green Bond Grant Scheme to include social and sustainability bonds, and renamed the framework the Sustainability Bond Grant Scheme.
In response to feedback from market participants on the Green Bond Grant Scheme introduced in March 2017 (the Original Scheme) and in furtherance of Singapore’s drive to be the epicentre of Asia’s green, social and sustainability bond markets, the MAS has expanded the scope of the Original Scheme to include social and sustainability bonds that meet prescribed qualifying requirements (the New Scheme), and relaxed the eligibility criteria concerning minimum tenor and issue size.
As reported in our 2018 Spring edition of Debt Capital Markets Global Insights, the purpose of the Original Scheme was to assist certain categories of issuers (qualifying issuers) with the costs incurred in obtaining an external review - or rating of qualifying bonds based on internationally recognised standards and frameworks (eligible expenses). The New Scheme covers the same types of eligible expenses in respect of qualifying social and sustainability bonds.
The categories of qualifying issuers under the New Scheme remain the same: All companies and financial institutions, whether onshore or offshore, qualify for the grant. Sovereign issuers are excluded.
To qualify for the grant under the New Scheme, the qualifying issuer's green, social or sustainability bonds must be:
Enhanced eligibility criteria: Minimum tenor and principal amount
Eligibility criteria concerning minimum tenor and minimum principal amount remain applicable under the New Scheme, but have been significantly relaxed to enable qualifying issuers, including green bond issuers, to gain access to the grant more easily.
ii. the total amount claimed by the qualifying issuer, including for the initial principal amount issued, does not exceed the cap.
Qualifying issuers should note that it remains a requirement under the New Scheme that more than half of the eligible expenses be attributable to Singapore-based external review service providers. Diligent enquiries about staffing and work allocation matters should, therefore, be made with service providers at the outside and throughout the life of the transaction, if necessary, to ensure that the Singapore nexus can clearly be demonstrated to the MAS.
Validity period of the New Scheme
The New Scheme is valid from 1 January 2019 to 31 May 2023.
Similar to the Original Scheme for green bonds, an application for a grant under the New Scheme may only be made after the qualifying bonds have been issued. Qualifying issuers should note the following pre and post-issuance requirements, and seek advice from their external advisers prior to any proposed green, social or sustainability bond issuance to ensure that the proposed issuance will satisfy the eligibility criteria under the New Scheme.