KUALA LUMPUR (May 10): OCBC Bank (Malaysia) Bhd has granted MFP Solar Sdn Bhd a RM100 million green term loan facility to finance the latter's development of multiple rooftop solar photovoltaic (PV) plants under a single master facility structure.

MFP Solar is a 55%-owned subsidiary of Mega First Corp Bhd, with the remaining 45% held by Pekat Teknologi Sdn Bhd. 

MFP Solar’s business model entails tendering and securing rooftop solar PV projects under its business model of solar power purchase agreement. MFP Solar is a registered solar PV investor with the Sustainable Energy Development Authority (SEDA).

In a statement, Tan Ai Chin, OCBC Bank Malaysia’s managing director of senior banker client coverage and head of investment banking, said this transaction marks a key milestone in the development of the domestic market for sustainable financing, particularly in promoting the importance of green loans.

As a bank that is fully committed to supporting sustainable development, OCBC Bank is actively supporting businesses which are at the forefront of promoting technologies engineered towards mitigating climate change-associated risks, according to Tan.

“We have taken a step further towards validating the green loan structure by procuring the assessment from MARC and I am glad that we have achieved the highest Gold standard, a testament to our robust structuring capability in sustainable financing," Tan added.  

OCBC Bank said each tranche of the facility will be a standalone term loan that will exclusively finance the project cost of an eligible rooftop solar PV plant. The loan documentation for the facility meets core criteria set out in the Loan Market Association’s Green Loan Principles (GLP) 2020 regarding the use of proceeds, processes for project evaluation and selection, and management of proceeds. 

The bank said the closing of the transaction attests to the pivotal role that banks are playing alongside the capital markets in supporting the nation’s transition to a low-carbon economy.

GLP-aligned loans are a positive step in the direction of mainstreaming green finance and ensuring that a globally consistent methodology is applied to identify loans as “green”.

Banks have been stepping up efforts to internalise sustainability goals in their lending strategy, a trend MARC believes will bode well for the resilience of the domestic banking sector to climate and other environmental, social and governance (ESG) risks, according to OCBC Bank. 

Commenting on the green loan assessment, MARC’s group chief executive officer Datuk Jamaludin Nasir said the ‘Gold’ assessment is the highest assessment on MARC’s scale for green financing instruments.

“In assigning the ‘Gold’ assessment, we considered the positive environmental impacts of rooftop solar projects that will be financed, the facility’s alignment with the Green Loan Principles including its use of external review on a green loan, as well as MFP Solar’s prospective sustainability performance,” said Jamaludin.

He added MARC considers the use of proceeds as impactful, as the eligible projects will support national climate change mitigation goals, corporate adoption of clean energy and a sustainable energy supply system.