BSP strengthens nature-related financial risks monitoring

The Bangko Sentral ng Pilipinas (BSP) has been improving how it monitors and scrutinize nature-related risks in the financial system as it encourages more funding in sustainable finance, according to BSP Governor Eli M. Remolona Jr.

“The BSP’s mandate is to promote financial stability. Thus, we have been building our analytical and research capabilities to monitor the nature-related risks in the financial system,” he said during the International Workshop on “Nature, Macroeconomy, and Finance” held recently at the BSP.

Part of developing and promoting financing for projects that will address climate change and other nature-related issues, is the establishment of a sustainable finance taxonomy by the BSP and other agencies.

This taxonomy is the “foundational for further climate initiatives, such as the development of carbon markets,” said the BSP.

During the workshops, Remolona stressed the need and urgency to understand the impact of nature on emerging economies such as the Philippines, and to better analyze its risks, opportunities, and policy challenges.

“Taken from the perspective of emerging market economies, the workshop delved into the dynamics, dependencies, and impact of nature on ecosystem services, opportunities, and financial risks; and policy challenges of nature on the macroeconomy and the financial sector,” said the BSP in a statement on Friday, Feb. 9.

The BSP also said that “beyond managing the risks (they want to) encourage financing for projects and activities aligned with the country’s climate objectives.”

“The workshop tackled the importance of green taxonomy and prospects for integrating nature in financial policy; the current state and challenges of compiling data on nature; potential policy implications for supervisors of nature-related risks; and cutting-edge research themes on nature,” said the BSP.

It further noted that during the Jan. 29 and 30 event, a panel session on financial inclusion was the highlight, as it discussed how micro, small, and medium enterprises (MSMEs) could improve its environmental-related actions. The panel was moderated by Monetary Board Member V. Bruce J. Tolentino.

The workshop was a joint initiative of the BSP, the London School of Economics and Political Science-Grantham Research Institute on Climate Change and the Environment. It is also participated by the World Wide Fund for Nature (WWF), and the International Network for Sustainable Financial Policy Insights, Research, and Exchange (INSPIRE).

The two-day event gathered researchers, policymakers, regulators, and representatives from the academe, multilateral agencies, and financial institutions.

“(They) discussed urgent risks due to the degradation of nature, through economic activities including deforestation and land use change. Protecting nature and biodiversity, especially for a country like the Philippines, is integral to climate-resilience,” said the BSP.

The workshop in the Philippines is the fourth by INSPIRE in Southeast Asia. Other workshops have been held in Singapore, Indonesia and Malaysia.

Meanwhile, the BSP in September 2023 released its proposed Philippine Sustainable Finance Taxonomy Guidelines (SFTG) to help the country raise the estimated $168 billion in green investments in the next seven years or so.

The Philippines has conditionally committed to a 75 percent reduction in greenhouse gas emissions by 2030.

The BSP-led Financial Sector Forum (FSF), an inter-agency group that regulates and supervises the financial sector, are the ones that prepared the SFTG. It includes the BSP, the Securities and Exchange Commission, Insurance Commission, and the Philippine Deposit Insurance Corp.