By Lee C. Chipongian
Local banks are making up for lost time implementing environmental, social and governance (ESG) as well as sustainability principles into their corporate strategy, risk management and operations, according to the Bankers Association of the Philippines (BAP).
BAP President Cezar P. Consing said Philippine banks are “hell-bent on catching up, despite being behind their ASEAN peers in integrating ESG and sustainability.”
Consing, also president and CEO of Bank of the Philippine Islands (BPI), noted that in the last few months, ESG and sustainability discussions and its framework has been taken up by lead government agencies such as the Bangko Sentral ng Pilipinas (BSP), the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE).
These agencies introduced guidelines, frameworks, regulations and tools to encourage sustainable lending, business practices and disclosures, according to Consing. The same issues and topics were also taken up during the second Sustainable Finance Forum where Consing said that institutional investors have been calling for listed firms to implement ESG.
“Our country lies at the epicenter of climate change. As banks, we must find a win-win situation where we can continue to remain profitable, despite the risks involved in sustainable financing. We all should be part of this transformation journey of creating a resilient economy,” said Consing. “We should make what we do profitable so it can be sustainable.”
The BAP is currently working with the World Wide Fund (WWF) for Nature, with support from the German Ministry for the Environment, Nature Conservation and Nuclear Safety, Association of Development Banks for the Asia and Pacific and United Nations Economic and Social Commission for Asia and Pacific, for ESG and sustainability principles.
“As economically minded people, we all react to sensible measures. What gets measured gets managed,” said Consing.
The BAP since 2017 has been promoting ESG through dialogue with advocacy groups and the forum is part of this. With WWF for example, the BAP offers guidance to individual banks to integrate ESG in their business models.
The BSP, for its part, is presently preparing the policy framework for sustainable finance that would cover the integration, stress testing and risks for banks’ ESG.
BSP Governor Benjamin E. Diokno said last week that they have completed a proposed policy framework for sustainable finance. This proposal is now disseminated for feedback from banks and industry players.
Diokno said the highlights of the proposed regulatory framework are: banks are expected to integrate ESG and sustainability principles in their strategic direction, as well as in their corporate governance and risk management frameworks; and banks will conduct scenario analysis and stress testing of its business exposures to assess their vulnerabilities over several ESG scenarios.