THE Bangko Sentral ng Pilipinas (BSP) is set to issue more regulations particularly directed at pushing sustainability as it streamlines the so-called “green financing” in the country.
Speaking at the Stratbase ADR Institute for Strategic and International Studies (ADRI) Conference on Wednesday, BSP Governor Benjamin Diokno said one of their key approaches to sustainable finance is to mainstream it through the issuance of enabling regulations.
According to Diokno, future regulations will be directed towards banks’ green investments, climate stress testing, prudential reporting, and potential regulatory incentives.
“We view that banks can fully heed the call for action only when they have a clear and comprehensive understanding of the impact of environmental and social risks in their operations and business viability,” Diokno said.
Earlier this month, the BSP joined the Central Banks and Supervisors’ Network for Greening the Financial System (NGFS) and its members in conveying contributions to achieving the global climate goals under the Paris Climate Agreement.
The statement was made in light of the 26th United Nations Climate Change Conference of Parties (COP26) summit in Glasgow, Scotland.
In July 2020, the BSP also became a plenary member of the NGFS—a group of central banks and financial supervisors that voluntarily exchange experiences and best practices to enhance the financial sector’s environment and climate risk management and accelerate the transition towards a sustainable economy.
“Banks are expected to progressively increase their targets on the proportion of the loan portfolio allocated for sustainable finance, and to consider environmental and social risks factors in credit underwriting and determining allowance for credit losses,” Diokno said.
“Banks are [also] expected to conduct vulnerability assessment of their operations, systems, and offices or branches to physical risks and other natural disaster events. The results of the assessment should feed into the potential enhancement of business continuity plans of banks,” the governor added.