BSP, IFC, and local banks pursue sustainable finance, stronger ESG

The Bangko Sentral ng Pilipinas (BSP) and the World Bank's International Finance Corp. (IFC) have renewed calls for banks to implement sustainable finance and to improve the environmental, social, and corporate governance (ESG) efforts. BSP Governor Nestor A. Espenilla Jr. said the central bank will remain supportive of capacity building initiatives. "With greater awareness and exposure on how ESG and environmental and social risk management (ESRM) can be integrated in the business practices, we believe Philippine banks will see positive effects on their bottom line, client retention, and organizational reputation while contributing to sustainable growth and development".

The IFC signed another memorandum of understanding (MOU) last Tuesday with local banks, and with BSP, conducted a high-level forum on ESG practices of local banks. The BSP and IFC already have an existing MOU which was signed last year. The MOU is with the Bankers Institute of the Philippines (BAIPHIL) and the Mongolian Bankers Association (MBA) to "Advance sustainable finance and green banking practices in the Philippines and Mongolia through capacity development and knowledge-sharing".

Under the agreement, BAIPHIL and MBA are "repositories of knowledge on sustainable finance and green banking" and the MOU further enhanced this.

IFC Director for East Asia and the Pacific, Vivel Pathak, has recognized the BSP's efforts in enhancing banks' ESG, "In bringing together leaders of the Philippine financial institutions and banking organizations for this forum, BSP is taking significant steps to promote sustainable finance in the country".

"Green finance presents a huge opportunity to deliver the country's goals on sustainable development and climate action. Higher standards of environmental and social risk management by financial institutions will enable private finance to flow into more green and socially inclusive projects", said Pathak in a statement.

Sustainable finance will enable banks to integrate ESG on how they operate and will help "increase financing for climate-friendly and socially inclusive projects", The BSP earlier said local banks have done much for good corporate governance over the years, however there is much to learn such as the ESG which is the set of standards that promote sustainability, and risk management concepts.

The BSP is a member of the Sustainable Banking Network (SBN) established by IFC and 10 founding countries in 2012 as a knowledge and capacity building platform for financial regulators and banking associations. As early as 2013, the central bank has had initiatives to better understand corporate governance and ESG. By 2015, the BSP and IFC completed a study to determine local banks' "experience and interest" in adopting risk management. Study results have indicated a moderate awareness but "very limited experience, and mixed perceptions."

Source : Manila Bulletin

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