BSP’s green bonds total $550M

Published July 29, 2021, 5:33 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) has raised its green bond investments to $550 million to promote green finance in the country, according to BSP Governor Benjamin E. Diokno.

This is an additional $200 million investments in the Bank for International Settlements (BIS)-managed Green Bond Fund this year, after it increased its green bonds from $150 million to $350 million in the third quarter in 2020.

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“The BSP has invested another $200 million in green bonds through the BIS Green Bond Fund for central banks earlier this year. So this brings the total investments of green bonds to $550 million,” said Diokno during his weekly online press briefing on Thursday.

Diokno said there is no “explicit target level or proportion” to how much the BSP will invest in the Green Bond Fund, but that the “strategic asset allocation exercise is done regularly.”

The BIS open-ended fund will enhance the BSP’s environmental sustainability objectives and will promote green finance. It is also part of the country’s gross international reserves (GIR) diversification. The BSP’s green bond investments is still below one percent of the GIR which as of end-June 2021 amounted to $105.7 billion.

Diokno said the BSP, as part of the 83-central bank member Network for Greening the Financial System, will continue to “look for opportunities to increase its green bond holdings in the future to promote green finance, and enhance the environmental sustainability objective of the (BSP).”

He cited the recent decision of the Executives Meeting of Asia-Pacific Central Banks or EMEAP to promote green bonds through the Asian Bond Fund earlier this month. “This is aimed at helping catalyze the further deepening of local currency-denominated green bond markets in the region,” said Diokno.

Diokno said the additional green bond allocation will encourage sustainability assets in the Philippines, and also supports its Sustainable Finance Framework for banks, first issued in April 2020.

At the moment, the BSP is focused on the integration of climate change and other environmental and social (E&S) risks to the enterprise-wide risk management frameworks of banks. Risks including physical (floods, typhoons, earthquakes) and transition risks due to climate change could result in significant societal, economic and financial risks affecting the banks and their stakeholders.

The BSP is proposing other rules for banks’ integration of climate change and E&S rules. The draft guidelines, circulated among banks for comments, seek to ensure the integration of sustainability principles in the risk management system to E&S objectives covering short, medium, and long term horizons related to the management of specific risk areas. “The exposure draft was released for comments of the industry until and are being evaluated by BSP,” said Diokno.

The BSP is also partnering with the World Wide Fund Philippines and the World Bank to conduct vulnerability assessments and stress testing exercises. “The BSP will soon convene the technical working group to roll out the pilot exercise,” said Diokno.

Other initiatives that BSP will do include its review of granting potential incentives to banks to encourage them to adopt sustainable principles. The BSP is also expanding the disclosure requirements or sustainability reporting for banks.

As of end-June this year, some $4.28 billion of Green, Social and Sustainability Bonds were issued by Philippine companies. This total accounted for 35 percent of the $12.07 billion ASEAN-labelled Green, Social, and Sustainability Bonds in the region.

“Our local banks have significantly contributed to scaling up green finance,” noted Diokno. Big banks have so far issued almost $2.8 billion worth of Green, Social and Sustainability Bonds, broken down as $1 billion sustainability bonds and P85.4 billion local currency-denominated green bonds.

The proceeds from these issuances have been invested in the following projects: renewable energy and energy efficiency; green buildings; clean transportation, pollution prevention and control; sustainable water management; environmentally sustainable management of living natural resources and land use; affordable basic infrastructure; access to essential services; employment generation; affordable housing; and socioeconomic advancement and empowerment.

 
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