BSP wants more sustainable financing, economy in 2022


Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno is calling for more strategy in integrating sustainability into the operations of financial institutions in 2022 to ensure a post-COVID-19 economy that is more stable, resilient, and inclusive.

“We want a more sustainable economy -- one where businesses and citizens are more mindful of the environment,” said Diokno in his 2021 “Message of the Year”.

“Climate change is real and its impact devastating,” he added.

The financial system in 2022 needs to have a better response to the climate crisis after the Philippines committed to reduce its carbon emissions by 75 percent by 2030 under the UN Framework Convention on Climate Change. “This is a gargantuan task that requires a whole-of-nation approach to achieve,” said Diokno.

The BSP, with the Department of Finance, co-chairs the inter-agency “Green Force” which is responsible for the Philippine Sustainable Finance Roadmap “to bridge policy and regulatory gaps in promoting sustainable investments.”

Last year, at the onset of the pandemic, the BSP issued its “Sustainable Finance Framework” and in October, it released its “Environmental and Social Risk Management Framework” policies. The sustainability framework detailed the BSP’s expectations for banks to incorporate sustainability principles in their operations while the E&S showed banks’ environmental and social objectives -- “which may include increasing the share of green financing in their loan portfolios,” said Diokno.

The BSP chief said that “with sustainability at the top of the policy agenda, the Philippines is paving its way to a climate-resilient economy and citizenry.”

“We shouldn’t let the COVID-19 crisis go to waste: we should learn from it. We will rebound and build back better—toward a more technologically advanced, more inclusive, and more sustainable economy for all Filipinos,” said Diokno.

The central bank is expected to implement through regulatory issuances, additional guidelines on sustainable finance which aim to embed sustainability principles, including E&S and governance considerations, in the strategies, corporate governance, risk management, and operations of banks.

The strategy also aims to direct the flow of capital toward green and sustainable projects.

Diokno said that there is a strong momentum in the issuance of such bonds both at the local and regional markets.

Since 2017, seven banks have issued $1.15 billion in foreign currency denominated and P85.4 billion in local currency denominated green, social and sustainability bonds.

Diokno said that amid the pandemic, two banks have issued social bonds worth approximately P29 billion to finance the needs of eligible micro, small and medium enterprises.

At the regional level, he said that sustainable bond markets in ASEAN+3 continued to expand to $389 billion as of September 2021. Some $278.5 billion worth of green bonds dominate the ASEAN+3 sustainable bond market while social and sustainability bonds amounted to $110.2 billion.