Most Filipinos struggle to safeguard their finances when natural disasters strike—a troubling reality for a country like the Philippines, which faces severe climate risks, according to the Organization for Economic Cooperation and Development (OECD).

“Many people living in Cambodia and the Philippines have limited financial resilience, suggesting that they may be unprepared to face further climate-related risks that would bring significant unexpected financial expenses,” the OECD said in a policy paper titled “Sustainable finance and financial literacy in Cambodia and the Philippines,” published on Monday, June 30.

The OECD drew this conclusion about the state of financial resilience in the Philippines and Cambodia from a 2023 survey it conducted in these two Southeast Asian countries, which it noted are among the most exposed to the impacts of climate change in the region.

The OECD survey results showed that over three-fifths of adults in the Philippines were being affected by climate-related natural hazards that had financial consequences for their households in the two years preceding the survey.

Additionally, nearly two-thirds of Filipino adults expressed concern about the impact of climate change on the planet, themselves, and their families, the OECD said.

According to the OECD, more than three-fourths of adults in the country have been holding at least one financial product or service.

However, a smaller proportion held financial tools specifically suited to building resilience, such as insurance—only less than two-fifths reported holding any type of insurance, the survey showed.

Moreover, among those who had been affected by climate-related natural hazards, over two-fifths did not hold any financial products, and less than one-fourth held an insurance product.

The OECD explained that this limited uptake may be influenced by factors such as limited supply, low awareness, or insufficient financial literacy.

In relation to so-called sustainable finance products, the OECD said that nearly half of adults in the Philippines believed that individuals could contribute to better environmental and social outcomes through their financial decisions.

Also, half of the survey respondents agreed that it was important to them that their savings and investments do not support activities harmful to the environment, the OECD said.

Despite these views, the OECD lamented that the uptake of sustainable finance products in the Philippines remains low, reflecting broader challenges in financial inclusion.

The OECD said that only over one-fourth of adults in the Philippines reported holding a sustainable finance product. Among these holders, the main motivation was the expectation of good financial conditions or returns, cited by about one-third of respondents, followed by a desire to contribute to sustainability goals.

But the OECD noted that a significant gap remains between interest in sustainable finance and actual product uptake, which may be partly due to limited consumer awareness. Among those not holding any sustainable finance products, more than two-fifths were unaware such products even exist in the Philippines.

It did not help that “adults in Cambodia and the Philippines scored below regional and international financial literacy averages,” the OECD said.

“Some 13 percent of adults in Cambodia and 30 percent in the Philippines achieved the minimum target financial literacy score,” it noted.

For the OECD, “limited financial literacy can impact individuals’ ability to manage climate-related risks.”

“Financial literacy is associated with higher financial resilience in both countries, and it is associated with higher willingness to use financial products and services to improve financial resilience against climate-related risks in the Philippines,” it said.

According to the OECD, limited financial literacy can hinder consumers’ understanding of sustainable finance products, their associated risks, as well as their ability to engage with them effectively.

Many consumers in both the Philippines and Cambodia found such products difficult to understand and showed limited familiarity with key concepts like “sustainable investments,” “green bonds,” and “greenwashing,” the OECD noted.

These findings suggest that low levels of financial and sustainable finance literacy may increase the risk of greenwashing and limit consumers’ ability to align their financial choices with their sustainability values, according to the OECD.

To help consumers in the Philippines and Cambodia navigate the sustainable finance market and protect against climate-related risks, the OECD urged policymakers in both countries to develop targeted financial literacy programs that improve access to resilient financial products, raise awareness of climate-related financial risks, and enhance understanding of sustainable finance concepts and risks such as greenwashing.