Investing in climate change

A CASE FOR CLIMATE CHANGE. BPI vice president and sustainable energy finance head Jo Ann Eala (left) says their green financing program should benefit a market like Cebu, which faces threats such as landslides, flooding and typhoons. (SunStar photo/Arni Aclao)

MORE banks in Southeast Asia have realized that climate change is a big business issue.

Besides lending huge amounts of money to fund business expansions, bankers now are looking into green financing to combat the adverse effects of climate change in the region.

Green financing is a form of investment, specifically dedicated to sustainable projects that could help mitigate the effects of climate change.

In a statement sent yesterday, Bankers Association of the Philippines (BAP) noted the Philippines is among the countries that have been mostly affected by climate change, but its investments in sustainable development still fall behind its regional peers.

It pointed out that overall, Asia still lacks readiness and resiliency while only a handful of countries have firm environmental, social and governance (ESG) standards.

“The evident gap at present in terms of ESG standards in the Philippines leaves us financial institutions, together with our regulators and other experts, to develop and become more resilient and climate change-conscious,” said BAP president Nestor Tan.

BAP, Asean Bankers Association (ABA) and the Association of Banks in Singapore (ABS), together with the World Wildlife Fund (WWF), recently convened to discuss the role of financial institutions in pushing for green financing.

BAP said the meeting of industry leaders opens an opportunity for banks to assess sustainable financing and is a step in the right direction towards a green economy.

Green financing in Southeast Asia is estimated to be valued around US$3 trillion and is spread around infrastructure, renewable energy, energy efficiency and food, agricultural and land use projects.

In the Philippines alone, green investment opportunities in infrastructure is estimated to be around $28 billion.

Yesterday, Ayala-led Bank of the Philippine Islands (BPI) pledged to help more businesses in the country achieve their goal towards sustainability.

The bank, which is one of the pioneers in green financing programs in the Philippines through its Sustainable Energy Finance (SEF) has backed the funding of 291 projects across the country, having a total loan value of P115 billion, as of 2017.

Of the 291 projects, more than half or 155 are energy efficiency projects, 68 are climate resilience projects and 68 are renewable energy projects.

BPI said it has helped fund 29 projects in Cebu, with a total loan value of P6.5 billion. Some 22 projects are for energy-efficiency, five are climate resilience projects and two are renewable energy projects.

SEF now makes up 10 percent of BPI’s overall corporate lending book, which BPI corporate credit products head Eric Luchangco says reflects a high awareness on sustainable initiatives.

Jo Ann Eala, head of BPI’s SEF, sees high potential in the bank’s SEF product to grow in a market like Cebu, which is facing threats of natural hazards like landslides, flooding and typhoons.

“Cebu City’s opportunity lies in a long-term plan and development model that will disperse and diffuse climate risk. Cebu will require investments in climate resilient infrastructure and technology,” she said.

Citing the 16-city study of the World Wildlife Fund for Nature commissioned by BPI, Eala said there are few things that Cebu needs to watch out for.

“There is saltwater intrusion in the underground water supply of the city because of heavy extraction due to the concentration of businesses in the city. On the other hand, Cebu’s uplands are noted to be vulnerable to landslides from extreme rainfall,” she said.

While it would require a hefty investment, depending on the business size and the kind of project to embark on, Eala stressed that going green can be very profitable, as it would help businesses save on expensive resources like power and water in the long run.

The shift to green business operations would also translate to good health and well-being of employees, and it can lower operating and maintenance costs.

BPI’s SEF loan package is offered for as low as P5 million to P7 million. What gives the bank an edge compared to others though is the free technology consultation, which is already part of the loan package that is subsidized by the bank.

According to Eala, they will make sure the green projects their clients would embark on are technologically and financially feasible and compliant with laws.

She said they are committed to push for profitability with a purpose.

However, Eala noted that any green initiative will only be successful if it would earn the support of the top management and its stakeholders as well as the overall “green” mindset of its employees. Continued information awareness or education is also important.

Sustainable finance, according to the BAP, is slowly gathering speed.

Tan said regulators are assessing parameters in ESG and investors are now more curious about green funds. Banks also acknowledge its feasibility and efficiency.

“Green lending and investment is slowly being tapped by Philippine banks,” he said.

However, like any other new investments, green financing has its own inherent risks but BAP is optimistic that with steady awareness campaigns, appropriate capacity building and regulatory support, all stakeholders will soon realize its opportunities and long-term benefits.


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