Cadlao Lagoon, The Philippines © Ivor Tichonow
The Philippines is one of the top countries facing disasters from climate change, mostly from river and coastal flooding. Protests have broken out recently over allegations that lawmakers and officials pocketed billions of dollars meant for flood relief projects. Even Philippines president Ferdinand Marcos Jr. acknowledged the issue when he went to inspect a flood control dam that doesn’t exist.
Meanwhile, the region has been hit with heavy rains and flooding from super typhoon Ragasa.
The nation’s central bank, the Bangko Sentral ng Pilipinas (BSP), has found that climate change is a systemic risk to the Philippines, even if it currently only has a small impact. Damages from climate change could impact 7.6% of the country’s total GDP by 2030 according to the World Bank. Meanwhile, the World Risk Report ranks the Philippines as the country with the highest risk from natural disasters.
That growing risk is why the central bank is trying to make sure its financial system is resilient to climate change risk and is one reason why the Philippines stood out in the first East and Southeast Asia Green Central Banking Scorecard.
BSP’s approach to climate change risk
BSP issued a sustainable finance framework in 2020 and expects its banks to incorporate ESG factors into their corporate and risk management systems. But promoting a climate-resilient financial system goes beyond just managing the risk, said Pia Bernadette Roman Tayag, BSP’s assistant governor of strategy, innovation and sustainability.
“Central banks [are] really being in a unique position to address climate issues in the financial system and to support the real economy. It’s about managing risks, but also looking at the opportunities,” she said.
BSP has a three-pronged approach to climate risks. One is managing climate and environmental risks related to price and financial stability. It also embeds sustainability in its own operations. And lastly, it wants to help mobilise finance toward green adaptation measures.
This approach allows the central bank to “really ensure that our financial system is not only safe and stable today, but really looking into the future, looking at the risks that climate puts forth, we’re ready, and we don’t only manage the risk, but also take advantage of the opportunity,” Tayag said.
Increasing financing for green projects
BSP encourages banks to increase their green financing in multiple ways, said Tayag.
One way is incentives. The BSP relaxed some rules last year to encourage more green financing, including a 15% top-up on single borrower limits on loans for green or sustainable projects. This means that a bank’s credit exposure to a single borrower or group of borrowers can be as high as 30% of the bank’s net worth. BSP also reduced reserve requirements for green and sustainable bonds from 3% to 0%.
This “has increased a little bit of green financing in the banking sector,” she said.
“Based on a survey that we took in July of this year, our large banks really benefited from using these two incentives to finance large ticket projects, as well as in the issuance of sustainable bonds”.
This included loans for renewable energy, waste management, sustainable water management, energy efficiency and clean transportation. While these incentives expire at the end of 2026, the central bank is examining the impact to help assess whether to renew or even enhance them, Tayag said.
The BSP is also working to increase financing through capacity building, as one of the biggest challenges of green financing is a lack of awareness. For example, the central bank recently conducted a climate risk assessment workshop for smaller banks to help them understand how to assess climate risk. It also hosts quarterly meetings on key issues around sustainable finance opportunities for banks and investors.
The challenges and opportunities of climate change
But challenges remain, Tayag said, especially with reliably assessing the pricing, financial instruments and investment products for various green projects, largely due to a lack of knowledge and data gaps. This can lead to missed opportunities, she added.
One way they are hoping to limit this knowledge gap and expand the capacity of financial institutions to understand green projects is to make data more accessible to banks and to understand the impact of other mechanisms, like blended finance.
The BSP is also pushing for adaptation finance. This has been a big challenge, Tayag said, “as adaptation finance is really sorely missing”.
A lot of global climate financing goes toward mitigation, with adaptation receiving an even smaller portion. The central bank is trying to figure out how to unlock financing, potentially through blended finance structures, and understanding what data is needed to make a proper risk assessment, Tayag said.
While climate change is a big focus for the central bank, it also takes biodiversity seriously as the Philippines is “one of the 17 megadiverse countries in the world,” said Tayag.
The country has a biodiversity strategy for conserving nature, which includes restoring 30% of degraded areas and narrowing the financing gap by 20%. But the financing gap is still high right now, she said.
“This is where we see there is an opportunity. So aside from ensuring that our financial institutions are incorporating biodiversity-related financial risks in their assessments, we also want to see financing biodiversity as an opportunity”.
This page was last updated January 14, 2026
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
