BSP to banks: Fund energy transition


The Bangko Sentral ng Pilipinas (BSP) called on banks to support the country’s energy transition amid the government’s drive to fulfill its commitments in the recently concluded United Nations Climate Change Conference (COP26).

BSP Gov. Benjamin Diokno said the central bank is enabling a regulatory environment to drive sustainable finance in the country and that banks should lead supervised entities by taking on the green and sustainable path. 

“We have started integrating sustainability principles in our investment process with over $550 million investment in the Green Bond Fund managed by the Bank for International Settlements,” Diokno said at a recent forum. 

“We are also reviewing our investment strategy to consider strategic allocation of investments toward those that espouse environmental, social, and governance principles,” he added.

The BSP earlier issued the Sustainable Finance Framework and Environmental and Social Risk Management Framework to set the groundwork for succeeding central bank policy issuances in sustainable finance.

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,” he said.

The Asian Development Bank, together with the Philippine and Indonesian governments, formed a partnership for the implementation of the energy transition mechanism (ETM) during COP26. Under the ETM, coal plants would be bought out in favor of developing renewable energy (RE) technologies.

Relative to this, BDO Capital & Investment Corporation President Eduardo Francisco noted during the Department of Energy’s Energy Investment Forum on Friday that Philippine banks have yet to fully appreciate the ETM. Nonetheless, the country’s largest bank is “very comfortable” in financing RE projects, particularly wind, solar, and geothermal ventures, particularly those in the execution stage.