Empowering Change: Financing a Sustainable Future in the Philippines
BY RAGIE MAE TAÑO-ARELLANO
THERE ARE STRONG INITIATIVES IN THE PHILIPPINES TO MEET THE CHALLENGES POSED BY CLIMATE CHANGE AND TO DEVELOP FINANCIAL RESILIENCE.
The Agenda for Prosperity, proposed by President Ferdinand Marcos, Jr., earlier this year, aims for a “moderately prosperous” economy by 2040. Typhoons, floods, landslides, and droughts continue to hamper progress toward this goal.
People and businesses in the Philippines are rushing to adapt to climate change. The World Bank estimates that climate change could lead to a 7.6 percent reduction in the nation’s gross domestic product (GDP) by 2030, according to research by Eco-Business, a group dedicated to sustainable development and environmental, social, and governance (ESG) performance. Capital-intensive industries like infrastructure may suffer the most. Then comes agriculture, which supports some of the Philippines’ poorest households and employs 25 percent of its workforce. The nation will suffer economic and human consequences from climate change if nothing is done.
Although Marcos’ Php464.5 billion climate budget is a welcome development, it only accounts for less than one-tenth of the overall national budget and might not be enough to cover the growing losses brought on by climate change. Given that climate-related hazards have caused damages exceeding Php500 billion in the last decade, it is probable that the financial resources needed to address future disasters will surpass the current allocation.
The event “Unlocking Capital for Sustainability Philippines 2023,” held at the Conrad Hotel Manila on September 14, 2023, and hosted by Eco-Business and the United Nations Environment Programme Finance Initiative (UNEP FI), convened leaders and decision-makers from the government, financial institutions, and civil society. The event gave them the opportunity to explore the latest developments and pathways toward sustainable finance in the Philippines.
Assistant Secretary Eufrocinio Bernabe, Jr. of the Department of Finance (DOF) underscored the government’s dedication to tackling environmental issues and promoting sustainability. “The race to net zero is a multidecade marathon which has already begun. And getting to the finish line, we require a sprint start with the reduction in global emissions by half by 2038,” he declared. He claims that the Philippine government’s interagency technical working group’s mandate is to assess the current state of sustainable finance and advance a sustainable finance agenda.
Bernabe underscored the critical significance of policymakers’ involvement in the de-risking of green investment opportunities, the harmonization of risk assessments, and the mitigation of fragmented approaches in order to expedite investment flow. In order to manifest the Philippines’ dedication, a framework for sustainable finance has been instituted, which permits the issuance of debt instruments, loans, and green and social bonds on international capital markets. As the Philippines approaches investors concerned with ESG factors, he said, they are refining their impact report to ensure accountability and transparency. Bernabe claims that the Maharlika Investment Fund’s establishment aims to draw in both local and foreign investors for direct equity investments in key industries, like agro-industrial projects, renewable energy, physical infrastructure, and water resources.
Since finance is crucial to sustainability in addition to avoiding a climate catastrophe, Ambassador Christian Halaas Lyster of the Royal Norwegian Embassy in Manila said that Norway has increased its climate financing since 2021. He emphasized that developing nations need climate money to adapt to climate change and achieve sustainable economic growth with lower emissions. Norfund, a Norwegian poor-country investment fund, supports this project. The Norfund-managed Climate Investment Fund invested $200 million in renewable energy and fossil fuelreducing technology covering South Africa and Southeast Asia, including the Philippines. Norfund's 2023 Climate Investment Mandate pipeline in the Philippines invests heavily in geothermal power and solarpowered telecom towers to reduce greenhouse gas emissions. Lyster said every Norwegian owns a piece of this fund, making administration and investments crucial. “Norway, through our pension fund, is indirectly working to unlock capital for sustainability. Every Norwegian, myself included, owns around USD250,000 of this fund.
This was done to ensure the long-term management of values. We have a generation fund that not only belongs to the generations of today but also the generations of tomorrow.”
Marcel Silvius, Philippines Country Representative and Deputy Director for Asia at the Sustainable Landscapes CoP Lead Asia-Pacific of the Global Green Growth Institute (GGGI), emphasizes the value of investing in sustainable landscapes, stating, “In the realm of climate change, extending the life of a tree holds more value than its timber. We need to invest in sustainable landscapes. It’s not throwing money at climate change; it’s an investment that will have a payback. It will enhance your economy. Going forward, a green economy is the way to go.”
BDO Unibank, one of the Philippines’ leading financial institutions, has pledged to provide access to capital for customers looking to transition into renewable energy businesses or projects that support a low-carbon transition. Attorney Federico Tancongco, Senior Vice President and Chief Compliance Officer of BDO Unibank, talked about how they were able to raise Php52.7 billion through peso-denominated fixed-rate Asean sustainability bonds in 2022. This was a lot more than the original offer of Php5 billion, thanks to strong demand from both individual and institutional investors. “There are so many who want to go into sustainable finance. We have to connect funds to viable projects because the money is there,” Tangcongco shares. But he adds that proponents of climate funding must adhere to robust ESG standards when submitting project proposals to ensure that projects not only benefit the environment but also contribute positively to society and maintain good governance practices. The integration of these standards into project proposals not only attracts investors but also guarantees a more holistic approach to sustainability.
The Bangko Sentral ng Pilipinas (BSP) is poised to launch the Philippines’ sustainable finance taxonomy in the near future. This initiative will play a pivotal role in defining and categorizing sustainable finance activities and projects, providing much-needed clarity for investors, financial institutions, and project proponents. A well-defined taxonomy is expected to stimulate further interest and participation in sustainable finance.
It was also discovered that there is currently more money available for sustainable finance in the Philippines than there are projects being proposed. This intriguing observation underlines the appetite for sustainable investments in the country. It also signifies an opportunity to bridge the gap between available capital and viable, sustainability-focused projects. The challenge now lies in connecting these funds to projects that align with the nation’s sustainability goals.
Unlocking Philippine Sustainability Capital 2023 set a new norm for Philippine sustainable finance talks. Through collaboration, ideas, and commitments, we can establish a financial landscape that flourishes and contributes to a sustainable and resilient Philippines.