PH central bank invests in Asian Green Bond Fund

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Friday, Feb. 25, that they have invested in the Bank for International Settlements’ (BIS) Asian Green Bond Fund.

The fund is part of the BIS Investment Pool or BISIP and is called the BISIP G3.

“The BSP’s decision to invest in the fund bolsters our sustainability efforts and supports our sustainable central banking agenda,” said Diokno.

The BIS launched the Asian Green Bond Fund, which is a US dollar-denominated and open-ended fund, on Friday in collaboration with development finance institutions and an advisory committee consisting of various central banks including the BSP.

The BSP already invests $550 million in the BIS Green Bond Fund or BISIP G1. The addition of BISIP G3 has expanded the BIS’s green funds for central banks to $3.5 billion.

According to Diokno, the central bank’s participation in the fund will “provide the BSP with an additional source of return and investment diversification that is consistent with our prudent approach to reserve management."

The BSP and other central banks invested in the BISIP G3 to help finance investments in green projects across the Asia Pacific region.

“The fund supports environmentally responsible projects in the Asia- Pacific region and provides a platform for central banks to invest their reserves in high-quality green bonds that meet internationally accepted standards,” said the BSP.

The BIS in a statement Friday said that they expect the Green Bond Funds to grow “as reserve managers' sustainable investment practices evolve.”

“The new fund offers central banks, both in Asia and beyond, opportunities to invest in high-quality bonds issued by sovereigns, international financial institutions, and corporates that comply with strict international green standards. These bonds help finance environmentally friendly projects in areas such as renewable energy production and energy efficiency in the Asia and Pacific region,” said BIS.

BISIP G3 was developed with the help of the Asian Development Bank.

The BISIP, as explained by the BIS, is a format commonly used by BIS Asset Management for its fixed income investment products.

The BIS said that eligible bonds should have a minimum average rating of “A-“ and “comply with the International Capital Market Association's Green Bond Principles and/or the Climate Bond Standard published by the Climate Bonds Initiative.”

“The fund will undergo annual reviews to ensure that it continues to be reflective of the shifting green finance landscape. As in the case of the other two green bond funds, the BIS will produce a dedicated annual impact report for investors,” said BIS.

In November last year, Diokno said they could increase their green bond investments to $1 billion by 2023.

The BSP’s $550-million worth of green bonds investments so far, which is part of its gross international reserves (GIR), is still below one percent of the country’s $108 billion total reserves.

The BSP invested $150 million as investments in the BIS Green Bond Fund in October 2019. In 2020 and 2021, it invested another $200 million for each year for a total of $550 million.

Last Feb. 9, the BSP issued the sustainable finance roadmap and guiding principles which were developed by the inter-agency technical working group on sustainable finance or the “Green Force”.

The BSP first released the Sustainable Finance Framework on April 29, 2020.

Diokno said the country’s 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.

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