The Bangko Sentral ng Pilipinas (BSP) has issued guidelines to banks on the integration of sustainability principles for investment activities.
Banks are expected to consider their sustainability objectives in their investment activities and ensure that such investment contributes to sectors considered to have beneficial impact to environment or society.
The guidelines cover banking book investments or debt and equity securities portfolios that are not being traded by the bank as part of its proprietary position.
Under the circular, banks will need to assess if the investment and the issuing company are exposed to material environmental and social (E&S) risks, and to analyse potential exit strategies if the said investment is found to have high E&S risks.
The banks’ due diligence review may be supplemented with the use of results of assessment of external review providers.
This ties in with the guidelines by the Securities and Exchange Commission governing the issuance of green, social, and sustainability bonds.
The guidelines also provides sample approaches such as exclusionary screening or best-in-class selection and allow banks to adopt other practices considering their sustainability objectives and investment policy.
“This regulatory issuance will cover the investment process, which is another significant area of banking operations that will complement the earlier issued Circular of the BSP covering the lending operations of banks.
We expect that the circular will further facilitate financing to sectors aligned with the sustainability agenda,”
said, BSP Governor Felipe M. Medalla.
This is the third set of regulations issued by the central bank in its bid to push the sustainability agenda.
BSP had previously issued Circular Nos. 1085 and 1128 on the Sustainable Finance Framework (April 2020) and the Environmental and Social Risk Management Framework (October 2021), respectively.
The frameworks provide banks a three-year transition period from May 2020 to incorporate sustainability principles in their strategic objectives, corporate governance. and risk management system.
