BSP, the central Bank of the Philippines, published a circular that provides guidelines on the integration of sustainability principles in investment activities of banks. These guidelines shall apply to all banks and non-bank financial institutions performing quasi-banking functions and their financial subsidiaries.
The guidelines cover banking book investments or debt and equity securities portfolios that are not being traded by the bank as part of its proprietary position. Banks are expected to consider the sustainability objectives in their investment activities and ensure that such investment contributes to sectors considered to have beneficial impact to environment or society. In line with this, banks should adopt policies implementing the sustainability objectives of investment activities. The guidelines provide sample approaches such as exclusionary screening or best-in-class selection and allow banks to adopt other practices considering their sustainability objectives and investment policy. Under the circular, banks are expected to assess if the investment and the issuing company are exposed to material environmental and social risks, and to analyze potential exit strategies if the said investment is found to have high environmental and social risks. The banks’ due diligence review may be supplemented with the use of results of assessment of external review providers. The circular on the guidelines also refers banks to the guidelines of the Securities and Exchange Commission governing the issuance of green, social, and sustainability bonds. The circular shall take effect fifteen calendar days following its publication either in the Official Gazette or in a newspaper of general circulation.
Keywords: Asia Pacific, Philippines, Banking, Securities, ESG, Sustainable Finance, BSP
Hasan leads Moody’s Analytics ESG methodology development. He is expert on carbon transition, nature related risks and is a guest lecturer at ESSEC Business school on sustainable finance.
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