Bank regulators are drafting a circular that lays down guidelines on how banks should integrate sustainability principles in their investment activities.
The Bangko Sentral ng Pilipinas (BSP) gave concerned BSP-supervised entities—only banks and not other financial institutions—until June 1 to give feedback on the draft circular.
In the draft, the BSP recognizes that investment activities of banks may play a role in supporting national goals of promoting sustainable finance.
The proposed guidelines set expectations on the integration of sustainability principles in investment processes.
By integration, the BSP refers to banks explicitly and systematically including material environment and social issues in investment analysis and decisions, to better manage risks and improve returns.
Last January, the BSP said it was looking at the possibility of extending regulatory incentives to banks that embrace sustainability principles, as part of efforts to mainstream sustainable finance and mobilize capital to address urgent global challenges.
While doing that, the BSP had proposed the inclusion of sustainable finance as a form of compliance with the mandatory credit to the agriculture sector.
Also, under the Sustainable Finance Framework, the BSP expects banks to progressively increase their loan allocations for green or sustainable projects as part of their set strategic environmental and social objectives.
Citing data from the International Finance Corp. which is part of the World Bank group, the BSP said investments in the Philippines and in three other big emerging markets—China, Indonesia and Vietnam—may reach $5.1 trillion if these economies adopt a postpandemic green recovery approach.
Such an approach includes investments in energy efficiency, green infrastructure, support for environment-related research and development, and incentives for low-carbon vehicles.
The BSP itself has incorporated sustainability principles in its portfolio management as part of its sustainable central banking strategy, having invested $550 million in the Green Bond Fund managed by the Bank for International Settlements.