Despite the economy’s forecasted contraction due to restrictions in movement and dampened consumer spending, BSP Governor Benjamin Diokno pointed to the country’s strong position before the pandemic hit. The 4-pillar response strategy of government also intersect with the UN Sustainable Development Agenda, showing consistency between recovery and building a green and sustainable economy.

Alongside the Circular, Mr. Diokno announced sustainable central banking as one of its strategic objectives, through improved internal capacity and assessment of climate and environmental risks to its regional operations. The financial regulator also signified its intent to apply as member to the Central Banks and Supervisors Network for Greening the Financial System, the aim of which is to enhance the role of the financial system to manage risks, and to mobilize capital towards sustainable development. He also counted innovative sustainable finance products that were launched by international and local banks to support health, labor, and MSMEs during the pandemic, and the rise of digital banking and payment, among the components of a toolbox to boost the Philippines’ recovery efforts.

BSP Deputy Governor Chuchi Fonacier reiterated the mandate of the BSP in maintaining price stability conducive to the economy’s sustainable growth that supports national commitments towards long-term ecological, social and economic balance. Building upon existing corporate and risk governance standards, Ms. Fonacier said the new framework subscribes to high-level sustainability principles and places accountability on the banks’ board and management in adopting effective environmental and social (E&S) risk management systems. Banks are also expected to disclose their banks’ sustainability strategic objectives and risk appetite, breakdown of E&S exposures, and existing and emerging E&S risks’ impact on the bank. She closed with the important role of banks in sending a powerful signal to the business community of their new strategic approach towards sustainability, and in inspiring their clients and stakeholders in making similar responsible business decisions.

BAP Risk Committee Chair and RCBC President and CEO Eugene Acevedo provided recommendations to optimize existing bank units and highlighted current bank practices to meet the Circular’s requirements. Further, global standards and opportunities in greening critical sectors such as energy provide means for banks to contribute in meeting the Sustainable Development Agenda and the Paris Agreement.

Climate change is both a source of financial risk and instability, and the BSP Circular reflects regional and global trends of jurisdictions developing regulatory frameworks to integrate sustainability into banks’ strategies and operations to protect against systemic environmental and social risks such as climate change, WWF Vice President Sylvain Augoyard said. He also mentioned the Basel Committee on Banking Supervision recently set up a high-level Task Force on Climate-related Financial Risks, one of whose objectives is to address climate-related financial risks through a set of supervisory practices.