On Tuesday, United Overseas Bank Limited (UOB), a Singapore-headquartered multinational bank with more than S$70 billion (about $52 billion) in customer deposits and a total asset base of more than S$113 billion (about $84 billion), announced the launch of its UOB Smart City Sustainable Finance Framework (UOBSCSFF).

The initiative marks the first dedicated initiative by a bank in Asia to make sustainable financing more accessible to companies contributing to the creation of smart cities.

UOB defines a smart city as one that “integrates physical infrastructure and digital spaces, through the use of technology, into human habits and behaviours to enable a more environmentally-sustainable city and provides a higher quality of life for all residents.”

Smart city imperative

Per their projections, Asia is expected to host 30 megacities (a large city with a population exceeding 10 million people) by 2030. The trend could bring with it all the attendant challenges of rapid urbanization in the modern era, from overcrowding and traffic congestion, to pollution and increased crime.

With global smart cities investment expected to hit $1 trillion per year after 2025, UOB cites research from McKinsey that expresses the benefits of smart city investment more granularly: a reduction in commuting times of 15-20 percent, a decline in cost of living expenses of 1-3 percent, a drop in greenhouse gas emissions of 10-15 percent, and a decrease in water consumption of 10-15 percent.

These figures do not include presumptive benefits from decreased crime (which may include more controversial initiatives such as predictive policing and increased surveillance), or productivity and quality-of-life gains from more efficient dealings with health care and government entities.

Green, green, green

UOB’s key focus areas under the Smart City financing initiative would meet selected UN Sustainable Development Goals: increased adoption of renewable energy, green building construction, energy efficiency, green transportation, water management, waste management, climate change adaptation.

UOB’s framework is supported through the Monetary Authority of Singapore’s Green and Sustainability-Linked Loan Grant Scheme, which establishes criteria for corporate and institutional clients wishing to access sustainable banking products. This framework requires businesses to demonstrate how their activities promote a better quality of life for residents through the aforementioned UNSDG-aligned focus areas.

The UOB Smart City Sustainable Finance Framework is an expansion of the UOB Green Infrastructure Financing Framework, which the Bank launched in 2019 to provide sustainable financing to companies in the infrastructure sector. The Bank also has the UOB Real Estate Sustainable Finance Framework that guides financing for clients in support of sustainable buildings.

Frederick Chin, UOB’s Head of Group Wholesale Banking and Markets, UOB, said, “The United Nations estimates that US$2.5 trillion is required annually for developing countries to bridge the financing gap in achieving the SDGs by 2030. Financial institutions can and must play a part, together with governments and businesses, to help channel more funds to sustainable development. Such efforts will go a long way in making the cities of Asia more sustainable and liveable.

“At UOB, we are committed to balancing opportunity with responsibility and helping businesses across the region advance responsibly through sustainable financing. Under our UOBSCSFF, we will be able to support the sustainability efforts of more companies from various sectors, working with them closely for the development of sustainable and smart cities.”

The Carbon Trust, U.K.-based consultancy specializing in climate and environment-related advisory and assurance services, provided a Second Party Opinion on the Bank’s UOBSCSFF in accordance with the Green Loan Principles and the Sustainability Linked Loan Principles issued by the Loan Market Association.

Lau Xin Yi, Carbon Trust’s South East Asia Green Finance Lead, said, “Smart cities are essential to help municipalities and countries manage and rebound from the COVID-19 pandemic. Digital technologies will play a growing role in delivering key public services and supporting economic activities while promoting environmentally-friendly practices. The UOB Smart City Sustainable Finance Framework is a timely and strategic initiative that recognizes the multi-faceted needs within smart cities while responding to different financing needs of stakeholders in the form of green loans and sustainability-linked loans.”

Founded in 1935, UOB is the largest credit card issuer in Singapore, with a card base that exceeds 740,000. It is also the market leader in loans to small and medium-sized enterprises. UOB is rated among the world’s top banks by Moody’s Investors Service, receiving a B+ for Bank Financial Strength, and Aa2 and Prime-1 for long-term and short-term deposits, respectively.

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