THE effects of climate change on the economy constitute one of the lesser-known financial stability risks that banks should learn how to prepare for, a Bangko Sentral ng Pilipinas (BSP) official said on Wednesday.
Speaking at the ESG Executive Forum—a multisectoral cooperation for financial inclusion spearheaded by Maybank Foundation—BSP Managing Director and Inclusive Finance Advocacy Office Head Pia Bernadette Roman Tayag said the risks of climate change have a “very big impact” also on the overall financial stability of an economy.
The ESG (environment, social and governance) Executive Forum, as attended by 200 participants from a multisectoral representation of the private sector, aims to boost support for sustainable finance among local companies.
Tayag said there is a need to develop a culture of awareness among banks to get involved with greener initiatives, especially knowing the Philippines’s vulnerability to climate-related incidences.
The Philippines has been estimated to be visited by 20 typhoons per year, while damage from climate-related calamities is at about 0.5 percent of the country’s gross domestic product (GDP).
Tayag said among the key expectations from the financial sector to push for a more “climate-friendly” environment include the banks’ initiative to redirect capital toward climate finance, sustainable finance and investments of environment-preservation intitiatives.
Banks are also expected to influence client firms to comply with environmental standards.
However, Tayag said regulators and banks alike are facing challenges in advancing this kind of thinking among the financial sector. These include the establishment of a clear business case for climate invesments, the lack of information, tools and expert advice to make financing decisions about green projects.
The financial sector’s inadequate capacity and weak enforcement of environmental standards were also seen to hamper the financial sector’s growth on the sustainable finance. “This is a journey. It is a long way to go, but we want to see more banks really understand that this is something that is inevitable, that this is something that they have to start addressing and it is something that they have to start investing in,” Tayag said.
Speakers in the forum also urged banks to use the “power of debt” to advance for climate-friendly initiatives, saying that banks—when extending credit to certain firms and companies—must also look at the businesses’ ability to follow environmental standards and not only focus on sole profitability.
Maybank Philippines Inc. President and CEO Choong Was Hong said Maybank organized the event as part of its own sustainable finance initiative by spreading awareness to other local private companies about its importance. “As a responsible corporate citizen, Maybank is committed to ensuring good environmental, social and governance practices, including the promotion of sustainable finance. This is very much aligned to our mission of humanizing financial services,” he said.