The Bangko Sentral ng Pilipinas (BSP) has committed to complete the climate stress tests, disclosure guidelines and incentives for sustainability-related projects within the year, based on its first Sustainability Report released late over the weekend. The inaugural "green" report, which covered 2022, discussed BSP’s progress in advancing the sustainability agenda in the Philippine financial system, its plans to integrate sustainability or environmental, social and governance (ESG) considerations in its strategic objectives and functions. It also reported on sustainability-related rules relating to financial supervision, monetary policy and operations such as reserve management and credit operations, and the projects and activities in support operations including risk management, currency production, technology and innovation development, building and maintenance, and procurement. Former BSP Governor Felipe M. Medalla, who is still the BSP chief when the report was released on July 2, said sustainability reporting “is an important lever that allows the BSP and its supervised entities to progressively shift towards adoption of environmentally and socially responsible policies and work practices.” “In embracing greater transparency, organizations are better able to measure and communicate their sustainability progress and performance, driving greater stakeholder engagement and improved investor confidence,” said Medalla. Meanwhile, one of the highlights of the first sustainability report is BSP’s 11 action points and which of these Sustainable Central Banking (SCB) Program which forms part of the 2020-2023 BSP strategy, will be implemented this year. Based on the report, the BSP with the World Bank plans to complete the climate stress testing program. “This activity may be expanded to cover other environment-related exposures such as biodiversity loss. Building on this exercise, the BSP will provide detailed guidelines for banks in conducting the same using their own data,” it said. The stress testing exercise will include prudential reports submitted by banks to “capture identified data relevant for surveillance of aggregate exposures of the banking system to climate and other environment-related risks,” said the BSP. As reported earlier by the central bank, the potential regulatory incentives are still under review, but they plan to complete sustainable-related perks within the year. The BSP said that in addition to the existing regulations that already incentivize banks to finance green or sustainable projects, the BSP is considering the use of preferential rediscount rates or provision for higher loan values related to its rediscounting facility. “The BSP is also reviewing the single borrower’s limit (SBL) regulations to promote lending to social and green projects under the Sustainable Finance Framework of the NG (National Government), among others,” said the BSP. The BSP has various regulations that are related to sustainable finance such as how banks and corporates will disclose or report sustainability endeavors. The inter-agency Financial Sector Forum (FSF) in June 2023 has finished its review of relevant regulators’ corporate governance rules to ensure long-term resilience of the domestic financial system. The BSP which leads the FSF, found the rules across regulators adequate in terms of the country’s sustainability agenda in the areas of corporate governance, risk management, and disclosure as provided under the Philippine Sustainable Finance Roadmap and “taking into account the finalization of the sustainability-related disclosures to be released by the International Sustainability Standards Board (ISSB).” “The BSP will update its existing disclosure requirements on sustainable finance, considering the results of the review of the FSF and the adoption of the Philippine Financial and Sustainability Reporting Standards Council of the ISSB standards,” said BSP. The BSP-led FSF, with the World Bank, is also developing the sustainable finance taxonomy which will “facilitate further inflows of investments toward green or sustainable projects.” “This taxonomy will build on the Philippine Sustainable Finance Guiding Principles, the country’s nationally determined contributions, and the ASEAN taxonomy. The development follows an iterative process focusing initially on climate change mitigation and adaptation. The taxonomy will later cover other environmental and social aspects,” said the BSP. Other SCB programs intended for the next years is the green finance element in the financial inclusion policies and initiatives of the BSP. This will be the subject of the next sustainability reports. The BSP said it will continue to study how it can best help promote inclusive green finance. “This work will also involve an analysis of how digital solutions can enhance inclusive green finance,” said the BSP, adding that the “vulnerable groups” such as the micro, small, and medium enterprises (MSMEs) will “play an important role in transitioning to a resilient and environmentally sustainable economy. The first sustainability report also discussed BSP’s participation in the national and international conversations on sustainable finance. It noted that the report “marks an important milestone as (BSP) demonstrates the BSP’s commitment to manage climate risks and achieve sustainable development outcomes.” The report is part of the key strategies under the 11-point SCB strategy which is to include climate-related financial disclosures in the annual report.