Study: PHL banks score low in climate change policies

IN Asia, Philippine banks scored lower than the average in terms of climate change policies despite the country being the most climate-vulnerable in the world, a study cited.

According to the Fair Finance Asia (FFA) Philippines 2020 Policy Assessment, local banks received a score of 2 percent out of 100 percent in climate policies. It is lower than the average of 4 percent based on evaluation of 45 banks from six Asian countries.

FFA surveyed BDO Unibank Inc., Bank of the Philippine Islands (BPI), Land Bank of the Philippines (Landbank), Metropolitan Bank & Trust Co. (Metrobank) and Rizal Commercial Banking Corp. (RCBC) in the Philippines.

While BDO and Landbank are “positioning themselves as champions for green energy,” both were scored very low in terms of climate and nature, FFA noted.

“The only policy commitments outlined in bank policies were focused on ensuring the companies the banks invested in disclose (LandBank) or reduce their greenhouse gas emissions [BPI, RCBC], or switch from using fossil fuels to using renewable energy sources [BDO],” the report explained.

Juliette Laplane, senior researcher at Fair Finance Guide International and Amsterdam-based research group Profundo, said the surveyed banks in the Philippines have no policies excluding the use of coal and other fuel fossils.

“Even if some of the banks disclosed some measures to finance renewable energy, there is really no strong incentive to support clients and encourage their clients to switch from fossil fuel to renewable energy,” Laplane said.

With this, the report said that the major banks should step up their climate policies because they will be dealing with the economic impact of climate change in the future.

FFA is advising the banks to incorporate environmental, social and governance criteria in their policies and operations. This, in addition to making sure the companies they are investing in are complying with international sustainability standards.

Bangko Sentral ng Pilipinas (BSP) Supervisory Policy Subsector Managing Director Lyn I. Javier agreed that the Philippine banks need to improve their sustainability initiatives. In April, the BSP inked its Sustainable Finance Framework amid the coronavirus pandemic.

“As banks rethink, review and revisit their strategies and business models, this is the best time to consider sustainability principles in the vision and strategic setting of the banking industry,” Javier said.

The BSP official also emphasized that banks should also keep in mind the financial risk of not factoring in climate change in their strategies. Citing a study, Javier said that increased rainfall in the country is seen prompting a surge in nonperforming loans and assets.

Javier said that the banks should be able to identify their exposure relating to the matter at hand and how this can affect the bottom-line figures.

“We want banks to address, understand and recognize that climate change brings forth financial risk,” she said. “It leads to potential losses in their balance sheets and income statements.”

While the Philippine scored lower in climate policies, it ranked highest in terms of financial inclusion at 44 percent. Local banks scored 12.8 percent and 6.2 percent in transparency and gender, respectively.