Philippine corporate governance requirements ‘adequately cover’ green finance goals

A group representing Philippine financial regulators has said its members’ corporate governance regulations are aligned with overall sustainability goals.

A review conducted by the Financial Sector Forum (FSF) has found that the regulations are “in line with the commitment of the FSF member-agencies to align the sustainable finance-related regulations in the areas of corporate governance, risk management, and disclosure as provided under the Philippine Sustainable Finance Roadmap”,  according to a statement released by the forum.

The FSF agencies, including the Bangko Sentral ng Pilipines (BSP), conducted a stocktake exercise regarding corporate governance regulations and assessed how relevant each regulator’s rules were in relation to sustainable finance.

The review found that the Philippine Securities and Exchange Commission code of corporate governance directs supervised companies to disclose material and reportable non-financial and sustainability issues in their business. The Insurance Commission requires entities to adopt the Own Risk and Solvency Assessment Framework and to identify, report, measure and manage insurers’ risks.

And the BSP issued the Sustainable Finance Framework in 2020 which directs banks to adopt sustainability principles in their corporate governance frameworks, risk management systems and strategic objectives.

“We recognise that ESG may be considered as a new risk trigger but our expectations from the board of directors to consider the impact of the related risks in their strategies and risk management systems are the same,” said BSP governor and FSF chair Felipe Medalla.

The FSF also announced it will develop its own taxonomy with a focus on climate risk mitigation and adaption. The taxonomy will largely draw from the Philippine Sustainable Finance Guiding Principles and taxonomy developed by the Association of Southeast Asian Nations.

The Philippines’ central bank tightened its requirements for banks to disclose climate-related risks in 2021. Its climate framework requires a number of annual sustainable and climate information disclosures from banks.

The World Bank considers the Philippines a high-risk country for climate change, given its location in one of the most cyclone-prone areas in the world. Its risk levels are expected to increase as climate change intensifies, with a heightened risk of cyclones, flooding and landslides.

Cyclones and other storms are increasing in intensity as the world becomes warmer, while a combined risk of flooding and drought could also pose a risk to the agricultural sector, leading to a risk of food inflation.