Bangko Sentral ng Pilipinas (BSP), the central bank of The Philippines, will tighten its requirements for banks to assess and disclose their climate-related risks, the bank announced on Monday.
The new rules will “provide granular expectations on the integration of climate change and other environmental and social risks in banks’ credit and operational risk management frameworks.” They will be published as “second-phase regulations” to complement the BSP’s existing Sustainable Finance Framework.
Introducing the new measures, BSP governor Benjamin E Diokno warned that a successful transition to a low-carbon economy is not a matter of isolated changes in the energy sector.
“We must also consider the potential risks associated with this transition given the interplay among economic activities,” he told the Investment Forum on Energy Transition conference in Manila. “The framework safeguards the stability of the financial system against potentially significant and protracted impact of climate change and other environment-related risks.”
The BSP’s framework on climate- and sustainability-related disclosure was released last year and is loosely based on the recommendations of the Taskforce on Climate-related Financial Disclosures. The framework requires a range of sustainability and climate information to be disclosed in annual reports, but banks were allowed a three-year grace period to comply.
Just one year later and the rules are already being strengthened in the Philippines, with an emphasis on encouraging Filipino banks to be more responsive to transition risks arising from the change to a low-carbon economy.
The BSP’s Sustainable Central Banking Program is one of its 2020-2023 strategic priorities. Diokno has said the bank intends to integrate environmental, social and governance aspects into the key operations and functions.
The BSP joined the Network for Greening the Financial System in August 2020, and has also been engaging with the International Monetary Fund on climate risk to the Filipino financial system.
The Philippines is located in the world’s most cyclone-prone region and is considered highly vulnerable to the impacts of climate change. The country is at risk from sea level rise, extreme weather events, rising temperatures and extreme rainfall with associated floods and landslides.
This page was last updated May 26, 2021
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