THE BANGKO Sentral ng Pilipinas (BSP) on Thursday launched its 11-point sustainable central banking (SCB) agenda as it seeks to mitigate climate risks by advocating green policies and practices.
“Very obviously, climate change would affect food supply and, as we know from our own history of inflation, this could lead to large supply shocks,” BSP Governor Felipe M. Medalla said at the launch event on Thursday, adding that it is important to prevent supply-shock inflation from becoming a more “permanent inflation.”
Headline inflation rose to 8% in November, bringing the full-year average to 5.6%. This is lower than the BSP’s 5.8% full-year forecast but well above its 2-4% target.
Mr. Medalla also said climate change will also affect how the BSP regulates banks, as capitalization requirements should be enough to bear constantly changing climate risks.
The BSP chief also called for action against climate change.
“We are an enabler, we are a mobilizer, we are a doer. We are proud to be so. Climate action is a whole of society undertaking and the BSP could only do so much but it will do what it can do,” Mr. Medalla said. “That’s why we call on everyone’s support to help implement the sustainable central banking program.”
Under its 11-point strategy, the central bank will initiate vulnerability assessment for environment risks in the economy.
It will also improve disclosure requirements on social and environmental risks in annual reports and enhance existing guidelines on stress-testing by adding climate risks and scenarios.
The BSP will align regulations with global standards, particularly in banks’ capital framework. It will also issue guidelines consistent with a sustainable finance taxonomy.
The central bank will also incorporate macroeconomic effects of climate change into monetary policy analysis by developing a model suitable to Philippine context.
The BSP will also explore the green credit window to contribute to the financing of sustainable economic activities.
“Building on ongoing research on incentivizing green lending by banks, the BSP will mobilize enhancements and innovations in its credit operations, as appropriate, to support the financing of sustainable economic activities,” the central bank said.
The BSP is also looking at incorporating sustainability objectives in its reserve management and exploring the expansion of eligible sustainable financial instruments such as green bonds for the BSP’s reserves.
In regards to financial inclusion, the BSP will continue to develop policies for the underserved and unserved segments of society, building on existing initiatives on sustainable finance.
“Under the SCB Strategy, the BSP will foster environmentally responsible and sustainable policies and work practices, as well as integrate environmental, social, and governance, or ESG, principles in its key functions and operations,” BSP Deputy Governor Chuchi G. Fonacier said.
She urged stakeholders to put sustainability at the core of their services transactions and risk management.
“The country’s transition to a sustainable and low-carbon economy is a collective responsibility. Let us strive to make sustainability principles the norm rather than the exception,” Ms. Fonacier said.
The Philippines is said to be one of the countries that are most exposed to climate change risks.
Climate-related hazards have caused P506.1 billion in losses and damage to the Philippines over the past decade, the Department of Finance said last year.
The World Bank earlier said the impact of climate change is likely to slash the Philippines’ gross domestic product by as much as 13.6% by 2040 if there is no action by the government and private sector. — Keisha B. Ta-asan