By Lee C. Chipongian
As part of foreign exchange reserve management, the Bangko Sentral ng Pilipinas (BSP) is initially investing $150 million in the open-funded Green Bonds managed by the Bank for International Settlements (BIS).
“The Philippines is one of the earliest subscribers (to the BIS green bond fund initiative). It’s now part of the GIR (gross international reserves),” BSP Governor Benjamin E. Diokno said Tuesday. Of the $86 billion GIR, $15.50 billion are reserve assets deposited overseas including in the BIS, and about $6.50 billion are foreign currency assets including bond investments in the BIS.
The BIS-managed Green Bonds, an investment pool facility, is the BSP’s signal that it is embarking on the “greening” of the finance sector, or green financing in support of an environmentally responsible finance and investment practices in the hope that it can convince the market to make investments that “promote climate- resilient, green, and sustainable growth,” according to Diokno.
Diokno said last month that investing in green bonds is one of the BSP’s GIR diversification management plans. The independent central bank is currently a member of the BIS’s advisory committee to for the green bond fund initiative.
“Climate change appears to be inevitable, and the financial sector has a significant role to play in pursuing sustainable and inclusive growth in the global economy, the environment, and society. The BSP is one with the BIS in its broader commitment to support environmentally responsible finance and investment practices,” said the BSP in a statement.
Diokno disclosed earlier this month that the BSP is preparing a circular on sustainable finance policy framework. He said that proposed is a regulatory framework that includes these main provisions: that banks are expected to integrate environmental and social governance (ESG), and sustainability principles in their strategic direction, as well as in their corporate governance and risk management frameworks; that banks shall conduct scenario analysis and stress testing of its business exposures to assess their vulnerabilities over several ESG scenarios; and that banks will be required to disclose their sustainability agenda in their annual reports, including risk appetites in the ESG field.
Diokno said the coming circular is just one of many circulars on sustainable finance. He explained that the BSP has a two-pronged approach to promoting sustainable finance — capacity building and awareness campaigns, and enabling regulations.
“We have to be even more proactive in green financing, especially so that the Philippines is cited as among the highly vulnerable countries to the effects of climate change,” said Diokno.
Presently the BSP is an active participant in the ASEAN Task Force on the Roles of Central Banks in Addressing Climate and Environment-Related Risks and a member of the International Finance Corporation-supported Sustainable Banking Network. It is also working with the British Embassy in Manila for the Low Carbon Energy Programme of the UK Prosperity Fund, according to Diokno.