How Dyna-Mac, An SGX-Listed Company Used OCBC’s Sustainability Linked Loan To Reduce Its Carbon Emission Intensity

In the recent climate change conference (COP27) at Egypt, Minister for Sustainability and Environment Grace Fu reaffirmed the country’s climate commitments to keep the 1.50 degrees Celsius goal within reach. This includes strengthening its long-term plans to achieve net zero carbon emissions by 2050 and reduce emissions to 60 million tonnes of carbon dioxide equivalent (MtCO2e) by 2030.

Like multinational corporations, small and medium-sized enterprises (SMEs) also have an important role to play in making the shift to sustainable practises to meet the country’s climate target.

In this regard, OCBC Bank has seen a change in how SMEs approach sustainability over the last year. According to Mr. Linus Goh, Head of OCBC’s Global Commercial Banking, their SME customers’ mindset has shifted from “what’s in it for me, what’s the consequence of inactionto “we have a serious intent and how do we move forward with it.”

As more small and medium-sized businesses (SMEs) start to see sustainability as a business risk and a key driver of growth, OCBC Bank expects its total sustainable financing to reach over $3 billion by the end of 2022, representing a growth of 50% year-on-year. This would be made up of over 600 SMEs across Singapore, Malaysia, and Hong Kong, of which 500 are from Singapore.

OCBC Sustainability Finance Framework Simplifies The Steps For SMEs To Get Started On Their Sustainability Journey 

To address some of the challenges—which include costs, lack of expertise, and limited resources— faced by SMEs in getting started on their sustainability transformation, it formed the OCBC SME Sustainable Finance Framework in November 2020.

“The programme was really meant to help SMEs take that first step, take it and make it an easy step. Out of 9 categories (built environment, renewable energy, energy efficiency, clean transportation, pollution prevention and control, circular economy, sustainable water and wastewater management, environmentally sustainable management of living natural resource and land use, and the latest addition in December 2021–climate adaptation) there is a whole myriad of certifications, rules, standards. Therefore, what we wanted was to just to make it easy for SMEs to say if I have the intent, I can move along and get this done without having to worry too much about the complexity there” said Mr. Goh.

Even though it is still in its early stages, OCBC Bank has been pushing this framework to other regional markets by adapting the categories to different local certifications and standards. 

Read Also: Financial Benefits For SMEs To Take A Green and Sustainability-Linked Loan

Dyna-Mac Was The First SME To Receive OCBC Bank’s Sustainability-Linked Loan

Dyna-Mac Holdings, an SGX-listed company, became the first SME to work with OCBC Bank for a sustainability-linked loan (SLL) in 2022. The company provides engineering, procurement, and construction services to the offshore oil and natural gas, marine construction, and other industries globally.

On the advice of OCBC Bank, Dyna-Mac started its sustainability journey with the goal of lowering costs. For example, it was suggested that Dyna-Mac set practical and achievable targets to reduce carbon emissions in compliance with international standards. Among them, one target was to reduce carbon emissions by 25% within five years.

OCBC Bank also helped Dyna-Mac develop a plan to achieve their sustainability targets, such as 1) switching from diesel power to electrical power; 2) using more energy efficient equipment in their facility, such as changing from fluorescent to LED lighting; and 3) using renewable energy sources such as solar to supplement their power needs.

Read Also: [2022 Edition] Complete Guide To SME Business Loans In Singapore

Dyna-Mac Employs Carbon & Emissions Recording Tool By Global Compact Network Singapore To Help Establish & Measure Its Baseline Carbon Emissions

As part of the sustainability-linked loan (SLL) requirement, OCBC Bank recommended Dyna-Mac use a carbon and emissions recording tool provided by one of its trusted partners–Global Compact Network Singapore–to establish and measure its baseline carbon emissions.

These tools aid firms in computing their emissions data on energy, water, and waste, which can then be used to guide their plans for emissions reduction. These targets are also independently verified by TEMBUSU Asia Consulting each year.

Dyna-Mac, which converted their existing bank facility into a SLL, would be able to lower the pricing on their credit facility if it meets the sustainability targets.

SLLs are one way for companies to push their entire business operations to become sustainable as a whole, beyond just investing in green assets, as it requires consistent measurement and tracking of targets like carbon emissions, water consumption, energy reduction, etc.

Startups And SMEs Are Crucial To The Net Zero Discussion

Startups and SMEs are crucial to the net zero discussion, as many of them are solution providers and enablers of change in sustainability.   

“They need to be facilitated and supported in a much bigger way to help them make that shift, beyond the initial green loans. Those who have it, they are moving quite aggressively ahead and we are enabling through SLLs. We will going forward expand the green (loan) framework that we have to be able to include SLLs within the various categories and entail it to specific industries,” said Mr. Goh.

Mr. Goh also commented on OCBC Bank’s future plans for SLLs, saying, “So we have already had a couple of breakthroughs in the engineering industry, in the textile & garment industry, and services industry. Having done those solutions, which takes time (around 3 to 6 months to curate), we are then trying to break it down and make it more available for others within the value chain. So, that we take advantage of the learning experience of the ones that have gone ahead and then try to break it through and make the impact be felt more widely. That’s our way of delivering net zero to SMEs.”

Read Also: Jolene Lum, 24-Year-Old Founder Of Urban Tiller, Turned A Passion For Sustainable Agriculture Into A Fast-Growing Startup

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