Central bank to finalize new sustainability rules
THE BANGKO SENTRAL ng Pilipinas (BSP) is targeting to finalize its proposed regulations on the wider adoption of sustainability principles in banks’ investment activities by August this year.
“The BSP is now on its third phase of sustainability-related regulations with the recent release of draft guidelines on the integration of sustainability principles in banks’ investment activities. The finalization of this policy proposal is targeted for August 2022,” the central bank said in a statement on Tuesday, referring to a draft circular released in May.
BSP Governor Felipe M. Medalla said promoting sustainability is urgent.
“We are committed to helping our supervised financial institutions develop their capacity in sustainable finance. This enabling approach will accelerate mobilizing funds toward projects and activities to achieve our growth targets and, at the same time, reinforce the country’s resilience to natural disasters and climate change,” Mr. Medalla said.
The first and second phases of the BSP’s sustainablity-related regulations were the issuances of the Sustainable Finance Framework in April 2020 and the Environmental and Social Risk Management Framework in October 2021, respectively. These guidelines set standards on incorporating sustainability principles in banks’ core businesses and risk management frameworks, as well as in assessing credit and operational risks.
The central bank said aside from these guidelines, it will also release its 11-point strategy to implement the Sustainable Central Banking Program.
“This will embody the BSP’s roles as enabler, mobilizer, and doer in championing sustainability in the financial system,” it said.
The central bank said it is also collaborating with industry associations, development partners, and other interest groups for capacity-building activities for banks and other institutions on sustainable finance.
It likewise noted a sustained rise in banks’ issuance of sustainable bonds since 2017.
Latest central bank data showed that sustainable bonds issued in foreign currency have reached $1.4 billion, while peso-denominated issuances reached P152.9 billion.
Meanwhile, through a partnership with the World Bank, the BSP is also conducting stress tests to assess the impact of climate transition risks on the banking system.
“The BSP will enhance its data collection tools to facilitate the assessment of climate- and other environment-related financial impact. It will also supplement existing regulations on stress testing with guidelines that integrate climate stress testing design,” the central bank said.
“Moreover, the BSP is looking into potential regulatory incentives to further mainstream sustainable finance. In relation to this, the BSP supports amendments to the Agriculture and Agrarian Reform (Agri-Agra) Law which considers engagement in sustainable finance as compliance with the mandatory agri-agra credit,” it added. — Keisha B. Ta-asan
