Financial industry collaborates with BSP on sustainability guidelines – Manila Bulletin

Financial regulators led by the Bangko Sentral ng Pilipinas (BSP) provide banks, financial institutions and businesses with the tools and guidance needed to effectively manage climate and environmental risks.

BSP Deputy Governor Chuchi G. Fonacier during the GRI-SM ASEAN Sustainability E-Summit 2021 on Thursday, October 21, said government and private sector are working together to develop sustainable finance as it incorporates environmental aspects , social and governance (ESG principles) to finance productive activities in a low-carbon economy.

BSP’s Sustainable Finance Framework, released in April 2020, gives banks and financial institutions three years or until the end of 2023 to design sustainable finance instruments to mobilize finance towards green or sustainable projects.

And so far, Fonacier said the BSP is satisfied with how Philippine banks are initially implementing the first phase of the sustainability guiding principles.

“The BSP has engaged the banks to discuss the actions taken to meet the expectations set out by the BSP and how sustainability principles have been taken into account in the strategy reset exercises given the impact of the pandemic on their business operations,” Fonacier said in the E-Summit. She was one of seven panelists for the fireside chat after a keynote address by Yuki Yasui, Asia-Pacific Regional Coordination Manager of the United Nations Environment Program Finance Initiative.

Fonacier said local banks are at different stages of implementing sustainability principles. “Some banks are at an advanced stage, but the smaller ones are just starting to incorporate this into their strategies and operations,” she said.

The BSP, she added, released the sustainable finance rules at the right time, when the pandemic was in its first months in 2020 and in time with banks reviewing their strategies with the public health crisis. In progress.

Part of the BSP’s sustainable funding plans is to give incentives to banks and it’s now up to Congress to approve, Fonacier said. The BSP is pushing for regulatory incentives for banks to accelerate the adoption of sustainable principles as contained in the Agri-Agra Amendment Bills.

Fonacier said it hoped that the BSP’s proposed inclusion of sustainable finance, including lending to green projects among the permitted modes of compliance with mandatory credit to the Agri-Agra sector, would soon be approved.

A set of viable incentives is part of the third phase of the sustainability or ESG-related guidelines, while the second phase will focus on specific expectations regarding the integration of climate change and environmental and social risks into banks’ credit and operational risk management frameworks. The draft circular is currently being examined.

During Session 2 of the two-day e-summit, Yasui of the UN quoted former Bank of England Governor Mark Carney in his speech as saying that companies that will not adapt to the climate change will eventually go bankrupt.

“For many banks, this means that climate risks go beyond what can be managed through the due diligence of individual customers. It has become a matter of business strategy that is directly linked to the banks’ entire loan portfolio,” Yasui said.

She pointed out that “there is little banks can do to manage their climate change risks at the portfolio level.”

“The only way to reduce the risks that are so high, so global and so systemic, is to be proactively part of the solution. and corporate goals are coming closer. For banks, this means financing the transition to a sustainable net-zero economy is inevitable,” Yasui said.

She said there was hope as many banks – whom she described as future decision makers – have signed up to the UN Principles for Responsible Banking launched in September 2019. There are more than 250 banks in 70 countries that have joined, and collectively the assets of these banks are worth $60 trillion, or about 40% of the global banking industry.

Fonacier, reacting to Yasui’s comments, said ESG risks “are an existential issue.” She also said that banks or financial service providers are key enablers in the transition to a net zero carbon economy. “We all have the opportunity to be future creators,” she said, noting that ESG risks present global and systemic challenges.

“Banks can choose to be future decision makers (and) a number of banks in the Philippines can already be considered future decision makers for being the first to embark on this journey,” Fonacier said. About $1.15 billion of sustainable bonds and 84.5 billion pesos ($1.78 billion) of peso-denominated green bonds have been issued in the country. These green bonds have been issued by the so-called “initiator” banks since 2017. According to another data from the BSP, at the end of September, 15 local banks issued $4.8 billion worth of green bonds, or about 29% of the bonds green, social linked to ASEAN. and sustainable bonds.

Securities and Exchange Commission (SEC) Commissioner Kelvin Lester Lee, one of the E-Summit panelists, said it’s already a big deal that banks play a unique role in ESG. He said he was “cautiously optimistic” that with 600,000 businesses in the Philippinesif all engage in sustainable business practices, a low-carbon economy will be achieved sooner.

BDO Unibank Inc. Senior EVP Walter Wassmer, also Head of Institutional Banking Group, said BDO’s vision on sustainable finance is a balance between the positive and negative impact of every project or loan the bank considers.

“A negative impact is not only environmental, there is also a social impact that must be taken into account,” he said. “It’s a balancing act that banks and financial institutions need to address, because we also need to support the growth of the economy as a whole.”

Wassmer said he also welcomes BSP’s decision to consider sustainable finance as Agri-Agra compliance.

“The problem is that COVID-19 has slowed us down,” he said. Businesses were more concerned with surviving the adverse effects of lockdowns than focusing on sustainability.

Still, Wassmer said investors continue to show growing interest in renewable projects and ESG funding amid the pandemic. So far, BDO has released $2.5 million in ESG loans and they hope to increase this amount in the coming years.

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