By Lee C. Chipongian
To address the threats of climate change head on, the Bangko Sentral ng Pilipinas (BSP) is set to review the groundwork for an environmentally sustainable financial system before the end of the year.
BSP Deputy Governor Chuchi G. Fonacier, head of the BSP Financial Supervision Sector, said they are about to finalize industry comments for a comprehensive sustainable finance policy framework.
Industry players have sent their comments on the first proposed circular on sustainable finance which includes banks’ environmental and social governance (ESG), its risks and stress tests.
“(On the) circular on sustainable finance, we exposed it for comments by the industry and other stakeholders. We are still evaluating the different comments before we finalize it for submission to the Monetary Board for approval,” according to Fonacier.
Under the proposed regulatory framework, the BSP expects banks to integrate ESG and “sustainability principles” in their business strategies, corporate governance and risk management. Banks will have to subject its business and capital planning to stress testing and “scenario analysis” to review for ESG weaknesses.
BSP Governor Benjamin E. Diokno said to be issued soon is just one of the first circulars the Monetary Board will approve on sustainable finance. He said he expects banks to fully disclose their sustainability agenda and “risk appetites in the ESG field.”
Diokno said previously that sustainable finance has a crucial role in encouraging more investments that focuses on “climate-resilient, green, and sustainable growth.” The BSP’s sustainable finance approach includes ensuring an enabling regulation, capacity-building and awareness campaigns.
The BSP itself has began investing in the greening of the financial sector by putting in $150 million initially in the Bank for International Settlements-managed open-funded Green Bonds.
Diokno said the Philippines was one of the first subscribers to the BIS green bond fund initiative.
The Green Bonds is now part of the country’s $86-billion reserves of which $6.50 billion are foreign currency assets including bond investments in the BIS.
The BSP said climate change is “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.”