MANILA, Philippines—The central bank on Wednesday (Oct. 20) urged financial institutions to embrace green banking principles to help reduce risks from climate change and broader environmental, social and governance factors.
In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the agency also recognizes its vital role in promoting sustainable development, knowing fully well that sustainability issues pose significant risks to its core mandates of price and financial stability.
“Sustainability, as a principle, is embedded in the charter of the BSP,” he said. “We are committed to remain responsive and proactive in our stance towards these risks to maintain price and financial stability.”
To help safeguard the stability of individual financial institutions and the entire system, the BSP implemented policies, including the issuance of the Sustainable Finance Framework for banks, in April 2020 and the launch of the Sustainable Central Banking Program.
To align with the national government’s sustainable finance policies, the BSP participated in the Inter-agency Technical Working Group on Sustainable Finance. This group is co-chaired by the Department of Finance and the BSP.
The technical working group brings together 16 financial sector authorities and critical government agencies, aiming to harmonize government policies on green and sustainable projects, establish an action plan to institutionalize and accelerate the growth of sustainable finance, and develop a pipeline of sustainable investments.
The BSP also joined the Network for Greening the Financial System in July 2020 — a group of central banks and financial supervisors that discusses best practices in developing environmental and climate risk management guidelines in the financial sector.
Diokno said adopting green, or sustainable, finance principles and practices can unlock various opportunities for the BSP and the banking sector.
“For instance, the BSP’s investment of a total of $550 million in the Bank for International Settlements’ green bond fund allows the diversification of the gross international reserves as it offers adequate returns compared to other fixed-income assets,” he said.
In the case of the banking sector, the BSP sees a need for banks and financial institutions to understand and manage climate change and environmental, social and governance risks to fully maximize opportunities behind lending or investing in green or sustainable projects.
The BSP urged banks to be innovative in designing sustainable finance instruments in mobilizing funds for sectors supporting pandemic response and recovery, and other economic activities that contribute to sustainable development.
“As we advance sustainability initiatives and continue to collaborate with relevant government agencies and other multilateral development partners, we hope that the sustainability agenda will have a big leap for the next five years,” Diokno said.