The action taken by the Bangko Sentral ng Pilipinas (BSP) on allowing banks to expand green financing facilities is expected to accelerate renewable energy (RE) installations in the country that will usher in comprehensive decarbonization of the Philippine economy moving forward.

As cited by Energy Secretary Raphael P.M. Lotilla, the BSP recently increased the single borrower’s limit (SBL) for green loans by 15% - and that is seen as a boost to the need for funding of many shovel-ready RE projects in the country.

Further, the BSP also decided on gradually reducing the applicable reserve requirement for green bonds from the prevailing 3.0% to zero-percent over a two-year period, and that may also entice added capital flow into the clean energy sector.

As explained, the BSP’s initiatives have been anchored on its 11-point Sustainable Central banking Strategy” to mainstream sustainable finance as well as support the achievement of the country’s climate commitments and sustainable development goals.”

According to the energy chief, the BSP’s move so far complements “the strategies implemented by the Department of Energy (DOE) to accelerate the Philippine Energy Transition Program pursuant to the instructions of President Ferdinand R. Marcos Jr.”

“These would entail big investments where private sector funds, including equity investments, green bonds or loans would be needed,” Lotilla stressed.

The country’s RE development roadmap prescribes hike in RE capacities’ share in the energy mix to 35% by 2030; and to have that accelerated to 50-percent by 2040.

Apart from investments in the core RE technologies, the energy department has also been eyeing capital influx for support infrastructure that will underpin renewables – including retrofit or port developments for offshore wind projects.

Other investment spheres that will require green financing will be the targeted voluntary decommissioning or repurposing of coal-fired power facilities, which are also part of the decarbonization strategy being pushed by the government; energy efficiency ventures as well as upgrading the country’s power system into smart grid stature.

In the prevailing landscape of RE project developments in the country, Lotilla emphasized that “universal and commercial banks have financed or approved loans supporting green or sustainable projects,” but there is expectation for a massive ramp up with wider support being extended by various government sector to clean energy investments.

Another government-initiated policy seen by the DOE to shore up RE investments is the provision of income tax holiday (ITH) for own-use and energy efficiency projects that had been recently laid down by the Board of Investments (BOI); along with duty exemption on importation of capital equipment, raw materials, spare parts and accessories.