A wind turbine is seen in a wind farm. — REUTERS

THE BANGKO SENTRAL ng Pilipinas (BSP) is temporarily easing rules to encourage banks to extend more loans for green and sustainable projects.

The Monetary Board approved a gradual reduction in the reserve requirement rate for green, social, sustainability, and other sustainable bonds issued by banks to zero from the current 3%, according to a BSP statement released on Saturday.

The BSP said the 200-basis-point (bp)reduction will be implemented in the first year of the policy’s implementation, while another 100-bp reduction will follow in the succeeding year for another 12 months.

These bond issuances should comply with the standards of the Securities and Exchange Commission (SEC) or other international standards, and the disclosure requirements under the Sustainable Finance Framework.

“The gradual and calibrated reduction in the reserve requirement rate for sustainable bonds does not constitute a change in the monetary policy stance but is envisioned solely to be a tool to promote sustainable finance,” the BSP said.

The Monetary Board also approved an additional 15% single borrower limit on loans for eligible green or sustainable projects.

“The eligible projects or activities must meet any of the principles or eligible categories of projects as laid out in the (1) 2022 Strategic Investment Priority Plan on Green Ecosystems, Health and Food Security; (2) Republic of the Philippines Sustainable Finance Framework; (3) Philippine Sustainable Finance Guiding Principles; (4) ASEAN Taxonomy for Sustainable Finance; or (5) Philippine Sustainable Finance Taxonomy Guidelines,” the BSP said.

The central bank noted the projects should be legal and compliant with existing environmental laws.

Both measures will be available to banks for two years from the effectivity of the policy. The BSP may review these measures as needed.

“As a sustainable finance champion, the BSP will continue to play an active, enabling role in fostering the transition towards a sustainable economy. We will identify and create appropriate incentives that are within our mandates empowering the banking system to steer capital flows toward growing green or sustainable investments and accelerate the development of solutions addressing just transition and adaptation-related challenges,” BSP Governor Eli M. Remolona, Jr. said in a statement.

The BSP cited its ad hoc survey showing 75% of respondent universal and commercial banks have financed or approved loans supporting green or sustainable projects reaching P830 billion and $14 million, respectively, as of end-June 2022.

Top projects supported by banks include those in renewable energy, sustainable water and wastewater management, energy efficiency, and green buildings.

In December last year, the BSP launched its 11-point sustainable central banking agenda as it seeks to mitigate climate risks by advocating green policies and practices.

The BSP released its first sustainability report in July, which outlines the progress made in advancing the sustainability agenda in the Philippine financial system. — AMCS