​Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno reported to an international audience the Philippine central bank’s efforts to encourage Philippine banks to become advocates of sustainable finance.

Governor Diokno was a speaker in one of the panel sessions of Sustainability Week Asia, a flagship Economist Impact Event focused on building climate-focused insights and solutions for the Asia-Pacific (APAC) region.

The BSP Governor joined a panel session on “Climate risk reporting: What works, what doesn’t, and what’s next”, which was broadcast on 16 February 2022.

Around 3,900 participants from across the APAC region joined the week-long event. Attendees included leaders, investors, policymakers, entrepreneurs, and researchers.

The BSP recognizes the important role of banks in promoting sustainability, such as through credit and investments in green projects.

The BSP also acknowledges that central banks are in a position to influence the adoption of sustainability principles in banking operations through enabling regulations.

“While we recognize the challenges and varying extent of maturity of banks with respect to sustainability reporting, we are optimistic that increasing levels of awareness and understanding among banks will further improve sustainable reporting and transparency. Hence, it is important for financial supervisors to enable and enhance the skillset and competency of the banking community,” said the BSP Governor.

Governor Diokno discussed how the BSP is undertaking measures in addressing climate change and associated environmental and social risks. The Governor further explained how the sustainability agenda in the financial system provides long-term strategic direction for the BSP.

The Governor communicated that the central bank has launched the Sustainable Central Banking Program and adopted a phased approach in introducing sustainability-related guidelines for its supervised financial institutions.

He also emphasized that the BSP is actively collaborating with government agencies and regulators through the Interagency Technical Working Group on Sustainable Finance, or the “Green Force,” to ensure a harmonized and cohesive action plan in mainstreaming and accelerating green and sustainable finance in the country.

In April 2020, the BSP issued the Sustainable Finance Framework, its first sustainability-related regulation.

The regulation serves as the overarching framework, which articulates expectations for banks to integrate sustainability principles, including environmental, social, and governance considerations in their corporate governance, risk management systems, business strategies, and operations. 

In October 2021, the BSP issued its second-phase regulation called the Environmental and Social Risk Management Framework.

The Framework covers the specific supervisory expectations on environmental and social risk management in relation to credit and operational risks.

The third set of regulations will include the issuance of guidelines on the management of environmental and social risks in relation to the investment activities of banks, the conduct of climate stress testing, and the enhancements to the prudential reports.