A sustainability session focused on climate-related financial disclosures was organized recently by Philippine National Bank’s (PNB) Corporate Sustainability Division, headed by Jean Baruelo, and attended by PNB’s Board and management. Geocel Olanday is the Chairman of PNB’s Sustainability Committee.

Speakers were Jed Llanes, Chief Product & Sustainability Officer of Komunidad Global, who discussed “Philippine Financial Reporting Standards (PFRS) S1 & S2: From a Strong Report to Recognized Value,” and Melissa Turingan, Sr. Director for Climate Change and Sustainability Services of EY Philippines, who presented “Transforming Climate Risk into Strategic Advantage.”

Sustainability and climate-related disclosures are no longer mere regulatory compliance matters but strategic imperatives that influence investor confidence, financial stability, access to capital, and long-term strategic competitiveness. Climate disclosure is now a board-level responsibility—not management’s alone—to ensure that sustainability information is accurate, reliable, and integrated into corporate strategy. The discussions highlighted the adoption of PFRS S1 and PFRS S2, which establish globally aligned standards for sustainability- and climate-related financial disclosures.

Mr. Llanes explained that the PFRS S1 & S2 framework ensures that sustainability performance is communicated through credible, investor-grade disclosures that translate into recognized value. He underscored that sustainability disclosures must be linked to financial performance, strategy, and long-term value creation, enabling stakeholders to appreciate an institution’s resilience and future readiness.

He also briefed the attendees on emerging regulatory requirements, such as the sustainability reporting roadmap for 2027 (covering 2026 operations) for large publicly listed companies with a market cap beyond ₱50B—meaning preparations need to start now—and the increasing expectations for financial institutions to provide transparent, decision-useful information on sustainability-related risks and opportunities.

PFRS S1 and PFRS S2 are ESG financial-materiality instruments: they ask how climate and sustainability affect the bank's value, speaking the same disciplined language as the financial statements. They are now measured by globally recognized benchmarks rather than domestic standards alone.

Under PFRS S1, organizations must disclose all sustainability-related risks and opportunities that could reasonably affect the company’s cash flows, access to finance, or cost of capital—connected to the financial statements, presented consistently over time, and providing decision-useful information for investors.

PFRS S2 focuses specifically on climate-related disclosure: climate risks and opportunities such as greenhouse gas emissions, climate scenario analysis with financial impacts, and measurable, forward-looking, time-bound targets with progress tracking.

Discussion also centered on the Philippines’ exceptional exposure to climate risks. According to the World Risk Index 2025, the Philippines ranked first. Twenty tropical cyclones enter the Philippines yearly, of which 10 make landfall, while Philippine seas rise three to four times faster than the global average. Furthermore, about three percent of gross domestic product (GDP) is lost each year to weather perils—a figure expected to reach 7.6 percent by 2040.

For banks, these realities have financial implications affecting credit quality, capital adequacy, and asset values. Typhoons, flooding, and adverse weather can damage borrowers’ businesses and collateral, leading to higher loan defaults and increased credit losses, which result in write-downs of capital and asset values. The question is: are banks pricing loans considering the physical climate risks carried by borrowers?

Meanwhile, Ms. Turingan provided insights on how climate-related risks can be transformed into strategic opportunities. She encouraged climate risk management to move beyond risk avoidance and become an integral part of business strategy, capital planning, lending decisions, and product innovation. Her presentation highlighted the importance of climate scenario analysis, stress testing, and assessing both physical and transition risks to strengthen organizational resilience and uncover new growth opportunities in sustainable finance, renewable energy, and climate-resilient investments.

The discussion demonstrated how climate-related disruptions can affect credit quality, collateral values, operations, and capital adequacy, reinforcing the need for banks to integrate environmental and social risks into enterprise risk management processes. Participants also examined how climate-related opportunities can support portfolio growth, enhance customer value propositions, and contribute to the country’s transition toward a low-carbon economy.

The session highlighted PNB’s Sustainability Strategy, which is anchored on four strategic pillars designed to strengthen agility and adaptability amid an increasingly complex operating environment. These pillars are (1) Customer-Centric, Digitally Enabled Sustainable Banking; (2) Future-Proofing Human Capital and Safeguarding Employee and Community Well-being; (3) Climate Resilience and Risk Management; and (4) Governance and Integrated Performance.

The Board noted that these pillars provide a strategic framework for embedding sustainability into business operations while supporting stakeholder value creation and institutional resilience.

There was a healthy exchange of views on sustainability priorities, climate risk appetite, performance metrics, and strategic targets. Continuing board education and active governance are essential to ensure sustainability is not just a reporting compliance exercise, but a strategic driver of long-term value creation.

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