The bank will be incorporating environment, social and governance (ESG) factors when assessing loan financing, as part of its push for sustainable investing.
The loan quantum for investment financing will be higher for mutual funds that are rated AAA or AA in the MSCI ESG Fund Ratings, Bank of Singapore (BoS) said in an announcement.
Previously, financing against mutual funds was based on the volatility of the asset’s value, liquidity of the asset and the credibility of the fund manager. Now, the advance ratio – the maximum percentage amount of the market value of the collateral that could be extended as a loan – will be increased by 5 percentage points for such funds, the announcement said.
BoS said that investment financing is commonly used by high-net worth individuals in growing wealth and enhancing investment returns. The private bank registered a compounded annual growth rate of close to 10 percent in the loans for investment financing from 2016 to 2020.
By adding an ESG lens to our lending framework, we hope to create a direct and positive impact in the investment of highly rated ESG assets, starting with mutual funds, Alexandre Lotfi, BoS global chief risk officer, said.