Makati city: Banks are demonstrating improved compliance with Agri-Agra lending requirements, influenced by the government's drive for environmental, social, and governance (ESG) policies, a Bangko Sentral ng Pilipinas (BSP) official stated on Monday. BSP Assistant Governor Pia Roman-Tayag highlighted that financial institutions are increasingly integrating ESG principles to manage governance and management risks.
According to Philippines News Agency, Roman-Tayag shared that several large firms in the country are early adopters of ESG practices. The BSP is promoting broader adoption, especially among banks, by aligning policies with global standards, including the Institutional Shareholder Services roadmap.
Roman-Tayag mentioned, "Recognizing that not all companies will immediately have the capacity to comply. For banks, we've issued our regulations as early as 2020, so the expectations are clear. They're also really building up their own capacity. So I could say that more banks are now integrating ESG in their governance and their risk management system."
A 2023 BSP survey revealed a growing awareness of sustainable financing, with 71.5 percent of respondent banks considering it highly important, an increase from 70 percent previously. Furthermore, approximately 90.3 percent of respondents plan to extend financing to sustainable projects, up from 85 percent earlier.
Roman-Tayag noted that the BSP has introduced several incentives to encourage banks to adopt ESG frameworks, such as additional single borrower's limits and a zero-percent reserve requirement for sustainable finance counted toward Agri-Agra compliance. The Agri-Agra law mandates banks to allocate at least 25 percent of their total loanable funds to the agriculture and fisheries sector, including a minimum of 10 percent for agrarian reform beneficiaries, to promote rural development.
She further emphasized the importance of the BSP's sustainable finance taxonomy in reinforcing ESG adoption. "We want that to be as granular as possible so it will be clear for them. So, when they make investment decisions, they know they're aligned," Roman-Tayag explained.
In a separate discussion, Roel Refran, chief operating officer of the Philippine Stock Exchange, stated that the country's carbon credit market requires stronger legislative support to reach its full potential. In the absence of such a law, regulators currently rely on the International Sustainability Standards Board, which provides a global baseline for reporting sustainability-related risks and opportunities. Refran highlighted the need for incentives and high-quality sustainability reporting, stating, "Because that is where it begins and ends."
