THE business of making money ‘green’ is beginning to flourish. One just needs to look at recent numbers to see the growing business opportunity.
In the private sector alone, an estimated $600 million in investments is needed to achieve Philippine energy efficiency targets for 2020 and $34 billion to meet the country’s renewable energy installation targets for 2030, according to the Department of Energy. In construction, the International Finance Corporation (IFC) estimated that $2 billion worth of investments are needed to set up green commercial buildings and $12 billion for residential developments. And then there’s the rich array of sustainable energy projects to support, including low-carbon energy such as smart grids, e-vehicles and hybrid transport, green chemicals and manufacturing products, wastewater treatment, and recycling and waste treatment services.
With such gargantuan green projects, it’s no wonder banks and financial institutions are jumping into the bandwagon to make green loans much more accessible to a wider range of entities, including small and medium enterprises.
Traditionally, investors look at financial metrics of companies alone. Nowadays, they are also taking into consideration a company’s environmental, social and governance (ESG) issues, not just financial returns. Any form of financial service that integrates ESG into investment or business decisions is termed “sustainable finance.”
At the Green Financing Forum organized by the Financial Executives Institute of the Philippines (FINEX) on June 20, 2018, sustainable finance champions hogged the limelight. Herry Cho, ING Bank’s head of sustainable finance in Asia Pacific, cited in her presentation that a sustainable strategy is no longer just “nice to have,” but now a need that demands urgent, concerted, and global-scale efforts to address climate change. Green bonds, which gained traction in 2016 in emerging markets, especially offer a glowing promise. While still proportionately small, the market for green bonds is growing fast and continues to diversify, said Ms. Cho.
At the forum, Securities and Exchange Commission Commissioner Ephyro Luis Amatong encouraged more local issuers to tap into the $36-trillion market, with investors in Asia, Europe, and North America now mandating green bonds.
The International Finance Corp., the private sector arm of the World Bank, recently issued the first internationally rated AAA peso-denominated green bonds equivalent to about $90 million. This was meant to finance the capital expenditure of Energy Development Corp. in a bid to improve the generation output of the country’s largest geothermal energy producer.
Green securitization is yet another high-impact tool, bundling green loans into securities to open the doors of institutional investors to small-scale green projects otherwise too small to access such capital.
The commitment to green financing, however, doesn’t end in bonds, credit lines, and securitization. Firms providing advisory services, technical assistance and transfer knowledge in climate business and industry-specific green investment principles could also benefit from the growing trend in sustainable finance.
By 2030, green financing is seen to emerge as a $44.5-trillion pie, with one-third of banks forecasted to be lending for climate change measures. In championing green and therefore responsible finance, banks and financial institutions assert their frontline position in helping the world become environmentally, socially, and financially resilient.
For humankind to survive what scientists warned as the Earth’s sixth mass extinction, everyone must think green and put their green money where their mouth is.
Ma. Victoria C. Españo is the President of the Financial Executives’ Institute of the Philippines (FINEX) and the Chairperson and CEO of Punongbayan & Araullo Grant Thornton, one of the leading Audit, Tax Advisory and Outsourcing firms in the Philippines.
marivic.espano@ph.gt.com
