Assalamu alaikum wa Rahmatullahi wa Barakatuh.

Our country's geographical location provides us with rich natural resources, with the economy mainly relying on agriculture and industry. In fact, agriculture contributes 14 percent to the country’s gross domestic product and employs over a third of the population.

However, it faces some of the highest disaster risks globally, which are expected to worsen as the climate changes. Climate shocks, whether from extreme weather events or slow-onset changes, are likely to worsen existing income and wealth inequalities and slow progress in poverty alleviation. According to the 2022 World Bank Country Climate and Development Report, economic damages in the Philippines could reach up to 7.6 percent of GDP by 2030 and 13.6 percent by 2040, affecting all sectors, especially capital-intensive industries and agriculture.

The Philippines also faces significant challenges in climate adaptation. In the 2024 Notre Dame Global Adaptation Initiative Country Index, the Philippines ranks 78th in vulnerability, indicating a high level of exposure and sensitivity to climate impacts, and 131st in readiness, highlighting its limited capacity to attract investments and implement effective adaptation actions.

Meanwhile, the Philippines performs relatively well in climate change mitigation, ranking 6th in the 2024 Climate Change Performance Index. However, Climate Action Tracker 2023 highlights that the Philippines’ climate policies are insufficient to meet its “fair share” of global mitigation efforts, stressing the need for more definitive policies to ensure the Philippines contributes adequately to global climate goals.

In his pre-recorded video message during the opening of the 16th Annual Global Warming and Climate Change Consciousness Week in 2023, President Ferdinand R. Marcos Jr. called on the people to unite in addressing this challenge: Let us be involved in creating solutions to mitigate the effects of global warming and climate change. Further, in his 2024 State of the Nation Address, he underscored that we must all be proactive advocates for increased climate responsibility and justice.

In response to the President's call, I am proud to share that one of the Public Expenditure and Financial Accountability (PEFA) Assessment Reports we launched last June 10 was conducted through the climate lens—the climate-responsive PFM framework. The PEFA Climate utilized 14 indicators to examine the extent to which the Philippine Public Financial Management (PFM) system is ready to support and foster the implementation of government climate change policies. I believe it will be a useful tool in reviewing our PFM Reforms Roadmap 2024-2028 and in creating a detailed plan to fix existing issues and meet PEFA-related policy goals.

The PEFA Climate Assessment Report found that climate considerations are increasingly being integrated into nearly every PFM function in our country, with very few areas remaining untouched, and are progressing in the right direction. There is significant awareness of climate change within the public administration, as evidenced by key policy documents such as the Philippine Development Plan (PDP) 2023–2028, where climate change is not only featured in a dedicated chapter but also treated as a cross-cutting issue across various topics. This overarching observation is reinforced by the Climate Budget Integration Index assessment for the Philippines, commissioned by the United Nations Development Programme and conducted in 2023.

It likewise reports that the country shows a strong commitment to transparency and an open government approach, which are essential prerequisites for effectively implementing green PFM. By mainstreaming climate change into PFM, additional information is provided for decision-making while ensuring that climate action is executed effectively. Additionally, there is clear political will and ownership of green PFM reform, with the government and public administration taking the lead.

Further, the Philippines benefits from a strong institutional foundation for climate action, characterized by a comprehensive climate law, robust policies, and a greenhouse gas (GHG) inventory. The emphasis on adaptation is appropriate, and established coordination mechanisms ensure that climate issues are addressed in an integrated manner within the public administration.

Overall, the Philippines possesses strong PFM fundamentals. Although we still have to work on budget execution reporting, all other prerequisites to successfully mainstream climate change consideration in PFM systems are in place.

To enhance the Philippine PFM system’s functionality in terms of its climate responsiveness and climate profiles, the PEFA Climate Assessment revealed that along with the specific challenges arising from it, we should strengthen the policy foundation, address resource and capacity constraints at the Climate Change Commission (CCC), enhance climate finance transparency and accountability, safeguard national investments, and streamline the adoption of Green Public Procurement (GPP) practices.

Beyond budget, the PEFA Climate Assessment, the first of its kind in our country, provides us with powerful insights into how the Philippine budgeting system has considered climate change. While the findings are encouraging, the report also points out that there is still much to be achieved for our country to have a climate-smart PFM system. I hope everyone will join us so that every peso in our budget works to build a greener and climate-responsive Bagong Pilipinas, not only for the present but for future generations as well.