Banks that lend to “green” and economic sustainability projects may be granted additional benefits by the Bangko Sentral ng Pilipinas (BSP) in line with the government’s push for sustainable finance.
“We are now looking at the potential use of preferential rediscount rates or the provision of higher loan values to enable banks to provide green loans or fund sustainable investments,” BSP Governor Benjamin Diokno said on Monday. , in a press release.
“BSP carefully assesses these potential incentives so as not to create unintended consequences. Nonetheless, we initially proposed the inclusion of sustainable finance as a form of compliance with compulsory credit to the agricultural sector,” Diokno added, referring to Republic Act No. 10000 or the Agri Credit Reform Act. -Agra of 2009. The law mandated banks to set aside 15 percent of their total loanable funds to the agricultural sector, but compliance had been so weak that the BSP was pushing for amendments to include alternative means of comply.
The government released the guidelines for its sustainable financing framework last week. Diokno said granting regulatory incentives would fall under the third phase of the framework.
“As part of this, we expect banks to gradually increase their loan allocations for green or sustainable projects as part of their strategic environmental and social objectives,” Diokno said.
PASB and the Ministry of Finance (DOF) are spearheading the mainstreaming of sustainable finance to bridge the financing gap for programs and projects aimed at addressing climate change and promoting inclusive growth.
The government itself was considering issuing green, social or sustainability bonds and other debt securities in offshore capital markets.
Proceeds from sustainable finance instruments can finance social expenditures such as education and health care for the poor, disabled and unemployed; basic infrastructure in rural areas; food security for farmers and disadvantaged populations; support for micro, small and medium-sized enterprises (MSMEs); Job creation; social assistance such as conditional and unconditional cash transfers; as well as social and social housing.
Amid the protracted pandemic, this funding can also be leveraged for the COVID-19 response.
Green spending was also eligible from sustainable fundraising, including projects promoting clean infrastructure, climate change adaptation, renewable energy, and environmentally sustainable management of living natural resources and land use.
The Philippines had ambitiously pledged to reduce greenhouse gas emissions by 75% over the next 10 years under the Paris Agreement.
Programs aligned with the Philippines’ 2030 commitments under the United Nations (UN) Sustainable Development Goals (SDGs) will also be funded through this funding program.
Achievement of the goals of the Philippines’ Medium Term Development Plan (PDP) and the Public Investment Program (PIP) aimed at infrastructure development would also be supported by the sustainable financing framework.
—Ben O. from Vera INQ
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