BSP pushes for ‘green banking’

MANILA, Philipines—The local financial system will become more stable as banks adopt “green finance” principles to lead to better management of climate and other environment-related risks, according to the country’s monetary regulator.

At an online press briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the agency’s Sustainable Finance Framework will also promote the stability of individual financial institutions.

He added that the scheme will allow banks to better mobilize funds for green or sustainable projects.

“Sustainable finance creates a positive disruption into how financial markets work as it incorporates the environmental, social and governance lens when investors assess the value, performance, and long-term growth of an asset,” he said. “This supports the financial system’s ability to fund productive activities in the new and low carbon economy.”

The BSP has taken a phased approach in implementing sustainability or environmental, social and governance guidelines, with the first part being the release of the Sustainable Finance Framework in April 2020.

The framework provides broad expectations on the integration of sustainability principles in the corporate governance, risk management systems, business strategies and operations of banks.

The second phase will focus on specific expectations on the integration of climate change and environmental and social risks in the credit and operational risk management frameworks of banks.

The BSP is now evaluating comments on the draft circular after it was sent out among financial institutions for their inputs earlier this year.

In the third phase, the BSP will study the grant of potential regulatory incentives to banks to accelerate the adoption of sustainable principles.

In the draft bills amending the Agri-Agra Law, the BSP has proposed the inclusion of sustainable finance, including lending to green projects as among allowable modes of compliance with the mandatory credit to the agriculture and agrarian reform sectors.

To maintain the momentum of mainstreaming sustainable finance, various central bank initiatives are underway.

This includes the BSP’s collaboration with key government agencies in the finalization of a sustainable finance roadmap and the development of principles that will provide guidance in identifying which economic sectors contribute to sustainable development.

TSB