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SEC sees strong demand for green bonds amid gov’t infrastructure push, new rules

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THE SECURITIES and Exchange Commission (SEC) said there is strong demand for green bonds domestic firms can take advantage of amid the infrastructure push of the government and following relaxed rules on bank bond issuance.

In his speech during the listing ceremony of Rizal Commercial Banking Corp.’s (RCBC) green bonds, SEC Commissioner Ephyro Luis B. Amatong said there is an “astonishing” amount of global capital in the market seeking for sustainable investments.

“[T]he current estimate is over $63 trillion. That amount represents the assets under management of 1,600 firms who have signed on to the United Nations Principles for Responsible Investment,” Mr. Amatong said last Feb. 1.

“This is more than a global trend — it is an opportunity for the Philippines.”

A green bond is a debt instrument to be earmarked for climate and environmental projects.

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In August, the government adopted the guidelines on green bond issuances under the Association of Southeast Asian Nations (ASEAN) Green Bonds Standards. This green bond standards provides framework for transparency, letting investors determine if a particular offering qualifies under their “green” investment mandate.

The SEC previously identified projects that can be funded by ASEAN Green Bonds. These include renewable energy, pollution prevention and control, clean transportation, and climate change adaptation among others.

Mr. Amatong said the Philippines is an “ideal destination” for sustainable investment, given the country’s established renewable energy industry and significant infrastructure demand.

“Indeed, Sustainable Investment is aligned with Duterte Administration’s thrust to dramatically upgrade the nation’s infrastructure through the Build, Build, Build. That infrastructure must be efficient as well sustainable and resilient to climate change,” he said.

The government has embarked on an P8-trillion infrastructure development program until 2022, when President Rodrigo R. Duterte ends his six-year term, in an effort to boost economic growth to 7-8% until then from a 6.3% annual average in 2010-2016.

With the “successful” issuance of RCBC green bonds, the commissioner said it is for certain that there is a supply and demand for green bonds in the country.

“Local banks have green assets in their portfolio and have customer demand to justify raising green funds,” Mr. Amatong said. “[T]here is competitive demand particularly on the retail side, for banks to issue bonds under BSP (Bangko Sentral ng Pilipinas) Circular 1010.”

The circular issued in August last year simplifies the process for universal and commercial banks looking to raise funds via bonds, doing away with having to secure central bank approval.

RCBC was the first bank in the country to issue peso-denominated bonds, wherein it raised P15 billion with an oversubscription thrice the offer size.

Apart from RCBC, Sy-led lenders BDO Unibank, Inc. and China Banking Corp. raised $150 million each worth of green bonds in the previous years to sole investor International Finance Corp.

Bank of the Philippine Islands, on the other hand, previously expressed interest in issuing green bonds this year.

Mr. Amatong also underscored the value of having green bonds in portfolios, as lending books with sustainable assets are generally less exposed to risks posed by new environmental regulations, technological obsolescence and climate change.

“Green funding then is also good risk management, for both sides of the balance sheet: greater diversification on the liability side and healthier loans on the asset side,” he added. — Karl Angelo N. Vidal

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