Speech of Senator Loren Legarda “Philippine Perspective on Green Lending Instruments and Supportive Policy Frameworks to Scale Low Carbon Investments”

The Philippines' contribution to the global greenhouse gas (GHG) emissions remains negligible at 0.31%. But we acknowledge the fact that, it is the collective contribution from low emitting countries, like the Philippines, that would enhance the support for higher ambition of GHG reduction.

The Philippines' accession to the Paris Agreement is an affirmation of our continuing commitment to work with the rest of the world in ensuring the survival of this generation and the generations to come, and the ability of the Earth to sustain life.

Our Intended Nationally Determined Contribution (INDC) has been assessed as compatible with the 2C warming limit under the Agreement. We are now in the process of revising the INDC to formulate our Nationally Determined Contribution (NDC) and I commit to do everything in my power to ensure the Philippines' NDC will be rated 1.5C-compatible.

While our INDC is conditioned on the availability of financial resources to pursue technology development and transfer, and development of human capacity and skills, strategies to achieve the mitigation commitments are already espoused in both the 2017-2028 National Climate Change Action Plan (NCCAP) and the 2017-2022 Philippine Development Plan (PDP).

The PDP, in particular, has embedded various mitigation strategies in the energy, transport, and industry sectors which include: (i) the promotion of green technology innovations; (ii) institution of appropriate incentives that will intensify the use of more energy efficient technologies in both the public and private sectors; (iii) further development and use of renewable energy (RE) in line with the provisions of the Renewable Energy Act of 2008; (iv) promotion of climate-smart infrastructures and designs as prescribed by the Green Building Code of the Department of Public Works and Highways (DPWH) which incorporates resiliency in engineering designs; (v) promotion of low-carbon, energy-efficient and environment-friendly urban transport systems; and (vi) promotion of sustainable consumption and production through the use of practices and technologies that would help attain economic goals and environmental standards that will facilitate the move towards low-carbon economy.

To operationalize these strategies and attain the committed emission reduction would require substantial financial support. The cost estimate to implement the identified mitigation actions for the energy, forestry, industry, and transport sectors is USD4.12 billion for the period of 2015 to 2030. Among the programs are the operationalization of the bus rapid transit system (BRT), the expansion of rail transport systems, and the shift from traditional fuels to biofuels; the development and use of more energy efficient technologies and practices which are especially relevant by the production sectors; development of more renewable energy programs; and the continued implementation of forest protection, management, and rehabilitation activities.

This huge financial resource requirement to transit to a low-carbon economy would indeed require external support. Lending institutions have critical role to play to unlock more investments, including those from the private sector, in the pursuit of low-carbon and climate-resilient growth. A strong partnership among the government, the private sector, and the lending institutions will be greatly needed to put in place the right conditions to attract domestic and foreign low-carbon investments .

The Philippines is already accessing funding facilities from international and local green lending institutions to support low-carbon investments. However, increasing access and engagement to these funds are perceived by the investors and clients to be challenging.

The demand side faces constraints such as high capital requirements making repayments more difficult and rigorous requirements to access current green lending instruments.

On the other hand, green lending institutions also face challenges, such as, market gaps/market imperfections faced by government banks which are heightened because of the lack of large-scale long-term finance and uncertainties over financing mitigation investments. For the private banks, long-term lending for low-carbon investments are constrained by the long-term risk associated with global financial crisis, liquidity requirements, and sustainability of climate investments, among other factors.

The policy environment that will upscale the participation of financial sector in low-carbon investments needs to be put in place. One strategy could be to identify the best mix of lending instruments to attract low-carbon investments. This would be critical in opening up more low-carbon investment opportunities for the private sector.

There should also be greater efforts towards making low-carbon innovations more affordable in the Philippines, as well as in increasing awareness of the severe impact of climate change which may foster accountability and reinforce engagement with the financial and private sector to encourage more investments.

The government may also take on the risks that the private market will not bear. For example, regulatory challenges and technical risks may be covered by the government through technical assistance engagement and capacity development initiatives to assist the private market in terms of readiness and ensuring viability of green investments.

In order to promote green banking and finance, the Philippine Climate Change Commission, in partnership with UNESCAP, initiated a program to mainstream sustainable climate action within financial institutions in the Philippines, starting off with the Bangko Sentral ng Pilipinas (BSP) or the Central Bank of the Philippines, being the supervisor of banking institutions in the country.

This program aims to engage the BSP and individual banks in greening the financial sector by increasing awareness and appreciation among the Board of Directors, senior management and other key senior officers and staff of different banks on how they can integrate climate mitigation and adaptation criteria in green financing in their lending operations, which will address climate risks and will further support the country's sustainable development agenda.

In the Philippine Senate, I have also filed a proposed measure to establish environmental units in every banking institution to assess and ensure that projects subject of financing applications as well as collateral offered as security shall conform to Philippine environmental laws.

In closing, I wish to stress that climate action makes good development sense. Pursuing green finance is crucial in our goal of pursuing climate-resilient, sustainable and inclusive growth that likewise contribute to the fight to keep warming within the 1.5 degree threshold.

Procrastination has already claimed hundreds of thousands of lives. It is time to bring the era of inaction to a close. Let our efforts reveal that we are firm in our resolve to deliver on our promise to save this planet for future generations.

Thank you.

Source: Senate of the Philippines

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