Philippines relaxes rules to drive lending for green projects


The Bangko Sentral ng Pilipinas (BSP) officially approved 2 temporary measures to promote sustainable development and carbon reduction investment initiatives. These measures are designed to encourage banks to create a more financial-friendly environment by increasing their lending capacity and lowering the reserve requirements for sustainable bonds. 

“As a sustainable finance champion, the BSP will continue to play an active, enabling role in fostering the transition towards a sustainable economy. We will identify and create appropriate incentives that are within our mandates empowering the banking system to steer capital flows toward growing green or sustainable investments and accelerate the development of solutions addressing just transition and adaptation-related challenges,” BSP Governor Eli M. Remolona, Jr. said in a statement.

BSP Governor Eli M. Remolona, Jr. (Photo: Eli M. Remolona Jr.)

Under the new measures, banks are allowed to provide loans for eligible green or sustainable projects, which must align with principles outlined in various documents, such as the 2022 Strategic Investment Priority Plan, Republic of the Philippines Sustainable Finance Framework, Philippine Sustainable Finance Guiding Principles, ASEAN Taxonomy for Sustainable Finance, or Philippine Sustainable Finance Taxonomy Guidelines with a top-up 15% Single Borrower’s Limit (SBL). 

The BSP is also reducing the reserve requirement ratio for banks, specifically for reserves related to green, social, sustainable development, or other sustainable bonds. The current rate of 3% will be gradually reduced to 0. It is anticipated that in the first year after the implementation of the new measures, there will be a reduction of 2 percentage points, followed by an additional 1 percentage point in the second year, ultimately reaching 0. Both measures are set to be in effect for a period of 2 years.

BSP states that issuing banks are also mandated to comply with disclosure requirements in the Sustainable Finance Framework and avoid greenwashing. And the gradual reduction in the reserve requirement rate for sustainable bonds is not a shift in monetary policy but is intended as a tool to promote sustainable finance.

According to the survey, as of the end of June 2022, approximately 75% of the combined universal and commercial banks in the Philippines have supported sustainable project loans. The total amounts were around 830 billion pesos and 7.8 billion pesos respectively (about 14.8 billion USD and 140 million USD). This constitutes about 7% of the overall loan portfolio of the banking system. The top 5 projects in terms of funding allocation include renewable energy, sustainable water, wastewater management, energy efficiency, and green buildings.

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