The Bangko Sentral ng Pilipinas (BSP) announced its decision to invest in green bonds launched by the Bank for International Settlements (BIS).
Just last month, the BIS launched an open-ended fund for central bank investments in green bonds. The BIS’s green bond fund initiative is said to help central banks to incorporate environmental sustainability objectives in the management of their reserves.
On Tuesday, the BSP announced that it has participated in the international fund.
“The BSP is proud to be a member of the advisory committee created by the BIS to give guidance on the objectives of the initiative and the features of the fund, which is designed to help central banks incorporate environmental sustainability objectives in reserve management,” the BSP said in a statement.
“With its participation in the open-ended fund, the BSP takes a step further in recognizing the role of sustainable investing in reserve management. Investing in green bonds will also provide diversification benefits to the Bank’s total reserves,” it added.
According to the BIS, the open-ended fund, denominated in US dollars, is structured according to Swiss law and belongs to the BIS Investment Pool (BISIP) family, a format commonly used by BIS Asset Management for its fixed income investment products. It is managed in-house by BIS Asset Management.
Eligible bonds have a minimum rating of A- and comply with the International Capital Market Association’s Green Bond Principles and/or the Climate Bond Standard published by the Climate Bonds Initiative.
The BIS said the initiative is part of its broader commitment to supporting environmentally responsible finance and investment practice.
“The BSP is one with the BIS in its broader commitment to support environmentally responsible finance and investment practices,” the BSP said.
The central bank follows the trend of “green financing” in the region, or the practice of investing in instruments issued by companies to investors, whose proceeds are used to finance projects that bring environmental benefits.
Earlier this year, HSBC Philippines President and CEO Graham FitzGerald said 2019 is an exciting from for the green bond market in the region as well as in the Philippines.
“We are seeing corporates getting into the journey towards green financing. There has already been a number of ‘firsts’ in terms of deals, and this is certainly increasing awareness among issuers and investors about the potential for this market. That’s what customers are demanding and that’s how businesses will find growth to compete in today’s economy,” FitzGerald said.
It was in January when HSBC Philippines executed two green bonds. They are the sole global coordinator in Ayala’s AC Energy $410 million Green Bond. They are also the joint lead manager in Rizal Commercial Banking Corporation’s (RCBC) P15 billion green bonds.
HSBC Head of Wholesale Banking in the Philippines Michael Brennan said HSBC sees an increasing association of green and sustainable corporate practices with a stronger credit profile.
““We expect sustainable and green debt issuance to continue to grow in popularity, and we have a responsibility to direct the flow of capital and help manage the transition to a low carbon society,” Brennan said.
The bank further said that green financing is especially beneficial for economies that are highly vulnerable to the effects of climate change such as the Philippines, as it mobilizes investments for both the government and private sector to carry out a broad list of initiatives.
“Climate change appears to be inevitable, and the financial sector has a significant role to play in pursuing sustainable and inclusive growth in the global economy, the environment, and society,” the BSP said in its statement on Tuesday.