Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said there is no target or limit in their green bonds investments as part of its strategic asset allocation (SAA).
The SAA is applied to the country’s accumulated $106.5-billion gross international reserves (GIR), which Diokno said earlier could reach $120 billion by end-2021.
So far, the BSP has included as part of its US dollar investments some $550 million of green bonds in the GIR. The GIR is composed of foreign assets of the BSP invested in foreign-issued securities, monetary gold, and foreign exchange.
“There is no explicit target level nor limit for BSP’s exposure to green bond investments,” according to Diokno. This was his reply when asked if the BSP could raise its green bonds investments by as much as $1 billion by the end of his term in mid-2023. The BSP’s green bond investment is still below one percent of the GIR.
Diokno said the BSP conducts an SAA exercise regularly. “The output of which serves as a guide to the asset allocation for the (BSP’s) reserves including the BSP’s exposure to green bonds,” said Diokno.
The SAA is determined and approved by the Monetary Board in line with BSP’s risk tolerance, he added. “Moreover, the BSP is cognizant that the market continues to evolve and grow. These developments are also taken into consideration as it conducts its SAA exercise,” said Diokno.
The BSP first allotted $150 million as investments in the Green Bond Fund in October 2019. The fund is administered by the Bank for International Settlements or BIS. An additional $200 million was announced by the third quarter of 2020, for a total of $350 million. This year, Diokno said they again invested $200 million for a total of $550 million.
The BSP invests in the BIS open-ended fund as this enhances the BSP’s environmental sustainability objectives. It also helps promote green finance in the Philippines.
The BSP is a member of the 83-central bank strong Network for Greening the Financial System. The BIS, in the meantime, offers financial services to 140 central banks including the BSP.
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.
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.
The BSP has been advocating for the mainstreaming of sustainable finance in the domestic financial system.
“The BSP and financial institutions play a crucial part in mobilizing funds to finance green and sustainable projects, and at the same time, in safeguarding financial stability from shocks coming from climate and other environment-related factors,” said Diokno during a recent Climate Defenders meeting with other pro-green finance groups.
The BSP has also strengthened governance on treasury activities and streamlined processes to allow for more bond issuances of BSP-supervised financial institutions and contribute to the growth of capital markets.
Diokno said he expects more banks to issue additional green bonds in the next months.