The Bangko Sentral ng Pilipinas (BSP) wants to include sustainable financing, or extending so-called “green loans” to corporations, as part of the proposed revisions to the mandated lending to the agriculture sector.
BSP Governor Benjamin E. Diokno said on Thursday in an online news briefing monetary officials have proposed the inclusion of sustainable finance, including lending to green projects, as among the allowable modes of compliance with the mandatory credit to the agriculture and agrarian (agri-agra) sector in the draft bills amending the Agri-Agra Law (Republic Act 10000).
A recent BSP survey showed that local banks voted the mandatory credits to the agri-agra sector as the “most challenging” in terms of regulatory compliance.
As of end-March last year, the entire Philippine banking system logged in an 11.02-percent compliance for other agricultural credit, which is below the 15-percent statutory credit requirement under RA 10000.
Compliance ratio for agrarian reform credit, meanwhile, stood at 0.97 percent. This is way below the required 10 percent.
“Sustainable finance creates a positive disruption into how financial markets work as it incorporates the environmental, social and governance lens when investors assess the value, performance, and long-term growth of an asset,” Diokno said.
“This supports the financial system’s ability to fund productive activities in the new and low-carbon economy,” he added.
In April last year, the BSP released its Sustainable Finance Framework. The framework provides broad expectations on the integration of sustainability principles in the corporate governance, risk management systems, business strategies and operations of banks.
For its next phase, the BSP said it will focus on specific expectations on the integration of climate change and environmental and social risks in the credit and operational risk management frameworks of banks.
Diokno also said the BSP is now evaluating the comments on the draft circular after it was exposed for comments earlier this year.
Afterwhich, the BSP said, it will study the grant of potential regulatory incentives to banks to accelerate the adoption of sustainable principles.
“To maintain the momentum of mainstreaming sustainable finance, various central bank initiatives are underway,” Diokno said.