Net zero is one of the catchwords that is now trending.
Nope Virginia, it is no way along the sub-zero, the “Siberian Chill Cherry '' juice drink and strong zero alcoholic drink made by freezing fruit in liquid nitrogen.
Net Zero refers to “any emissions are balanced by absorbing an equivalent amount from the atmosphere. This is in line with the 1.5 degrees Centigrade global warming target in the Paris Agreement; the global carbon emission should reach net zero sometime in 2050.
The Bangko Sentral ng Pilipinas (BSP), domestic and foreign banks and financial institutions, and the International Monetary Fund (IMF) are at the forefront of pushing for this advocacy.
These institutions are not only assessing the implications of climate change, specifically on credit quality and economic growth in general but also drawing and crafting ways to attain this Net Zero aspiration.
The IMF, in its June issue of Finance and Development Magazine, says climate change is “widely considered an existential threat to the planet” as well as admitted “poses a special challenge” to the Fund.
And rightfully so, considering that “not everyone appreciates the seriousness and the urgency of addressing climate change and its risks for global prosperity,” as some raised the question that such “has little to do with the core mission of the IMF.”
However, the Net Zero desire opens a floodgate for economies to invest more in “accelerating their low carbon transition,” an additional pressure for countries facing “contraints on fiscal and debt sustainability.”
Here, the BSP is cognizant of the perils brought about by climate change, which, to a certain extent, could jeopardize credit, liquidity, or operational risks and could threaten the stability of individual banks and the financial system.
To mitigate this, the BSP is advocating close, strong and concerted efforts with banks and financial institutions. BSP Deputy Governor for Financial Services Sector Chuchi Fonacier highlighted this in a recent Net Zero discussion with the Security Bank and its foreign stakeholder, MUFG.
“We need to further strengthen collaborative efforts to capacitate both the demand and supply sides. For instance, there is a need to capacitate businesses to produce more bankable adaptation projects.”
The one-day dialogue discussed the government’s and financial institutions’ various initiatives to cut carbon emissions to a small amount of residual emissions that can be absorbed and durably stored by nature and other carbon dioxide removal measures, leaving zero in the atmosphere.
Banks, specifically, have to be “innovative in developing new products and services that provide climate-responsive and socially supportive features.” A couple of commercial banks – Security Bank and Rizal Commercial Banking Corp. – already have been doing their share in zero net transition.
Along with BSP's strong intent to drive financing towards activities that contribute to the country’s climate commitments and sustainable development goals, both banks’ lending strategy and operations include winding down financing to coal-fired power plants and instead focus more on renewable projects such as windmills and solar energy projects.
Lending to renewable projects, particularly for Security Bank, encompasses corporate and retail operations. The financial institution is offering a package appropriate for its customers that includes gearing up the client's abode with solar panels or the purchase of an electric vehicle.
In step with the global zero net transition, MUFG Bank Ltd. has increased its sustainability-related financing to 100 trillion from 35 trillion yen as part of its blueprint for the carbon neutrality goal of Southeast Asia.
It’s a long way to go but it’s encouraging to note that everyone is doing their share through various initiatives to support the pressing matters relating to Net Zero World.
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