AS PHILIPPINE banks have used last month to convene for their Annual Shareholders Meetings, it is also time to take stock into their commitments for pursuing genuine sustainability.
For years, civil society groups worldwide have been pressuring financial institutions to divest their assets from fossil fuels. These sources of dirty energy are the primary source of greenhouse gas (GHG) emissions that trigger human-induced climate change.
A recent global report revealed that keeping operating current fossil fuel infrastructures and those still in the pipeline would result in at least a two-degree warmer world, bringing about more extreme climate impacts.
Partly because of this, experts have forecasted an estimated USD4 trillion of stranded assets under fossil fuels, making them economically undesirable in the long-term. Most assets linked to coal, which currently powers around half of power generation in the Philippines, would become stranded globally by 2030.
Currently, funding for fossil fuels from public and private entities still outpace that for climate solutions, especially renewable energy (RE). Divestment from exploitative industries and their funders aims to cut the lifeline that allows for dirty energy to continue expanding, despite the clear imperative to stop doing so.
Are the banks really divesting?
Four banks have declared their intent to stop direct coal financing. The Bank of the Philippine Islands (BPI) and BDO Capital and Investment have both made public statements aligned with this move. BPI particularly plans to exit coal funding as early as 2033 and cut such financing by half in 2026, with consistent climate-related financial risk disclosures to stakeholders.
This year, Rizal Commercial Banking Corporation pledged to avoid coal financing by 2031, in addition to enhancing its lending for RE projects and being more transparent with its GHG emissions. Security Bank has recently expressed its goal to stop funding new coal-fired power plants by 2033, joining these select few banks.
While commendable on the surface, it is evident that these pronouncements are nowhere near enough to reverse the tide against fossil fuel finance. According to the assessment of the Withdraw from Coal (WFC) network, 11 of the country's 15 largest banks have yet to make any form of commitment to divestment from any fossil fuel; these include institutions such as Land Bank of the Philippines, Philippine National Bank (PNB), Metrobank, and China Bank.
The WFC also reports that financers continue to indirectly support future coal projects through the issuance of bonds and underwriting. For instance, BDO is linked to the financing of two coal plants owned by Aboitiz Power, both of which suffered outages that triggered a "red alert" status in Luzon last year. Land Bank, which is accredited by the global Green Climate Fund that aims to help developing nations reduce GHG emissions, is also linked to such funding.
Even then, the local banks recognize that coal could become too costly for their investments in the next decade, a trend recognized worldwide. This is why some of entities, including BPI, BDO, and PNB are beginning to explore financing projects on natural gas, a fossil fuel cleaner than coal but still more pollutive and a bigger contributor to global warming than RE.
The notion of natural gas as a "transitional fuel" has gained popularity, to the point that many national candidates, including some presidentiables, are open to increasing its share in the nation's energy mix, projected to double per the latest Philippine Energy Plan (PEP).
Yet the energy transition in the Philippines has been occurring for the past few decades already, and not for a more sustainable energy sector. While the PEP has envisioned a 35 percent RE share in the power grid by 2040, this share has actually gotten smaller since 1998 due to the drastic increase of the nation's reliance on coal, not to mention the planned growth of the natural gas industry.
These arguments show that Philippine banks are not truly committed to genuine sustainable development, which inherently involves coal phase-out and RE development. Exploiting loopholes as much as areas to extract fossil fuels results in not only more vulnerable communities and ecosystems, but also more expensive electricity rates and higher losses in economic productivity, including the profits of the banks themselves.
The Institute for Energy Economics and Financial Analysis reports that potential investors in liquefied natural gas facilities risk are exposed to nearly USD14 billion worth of stranded assets. While its proposed rapid build-out is triggered by the expected depletion of the Malampaya reservoir, the lack of existing transmission and distribution infrastructures, the climate imperative, and the inevitable growth of RE are clear signs for potential investors to turn away.
Indeed, calls for more sustainable financing only grow louder with each passing day. The Catholic Bishops' Conference of the Philippines recently committed to withdraw its assets from banks still supporting fossil fuels by 2025. More shareholders should pressure the leaders of their banks to formulate more sustainable policies and portfolios, from divestment to reinvestment into ventures like RE.
These are some of the elements of an overall just transition away from fossil fuels and into RE. This process, which should be initiated urgently and occur within the next two decades, is a necessity for the well-being of any sector, from financers and investors to high-risk peoples.
Whether you look at it from a scientific, financial, or moral perspective, we must invest in this just transition. This is not just about shareholders in banks and corporations anymore; this concerns shareholders of our common home, which means all of us.
John Leo is the Deputy Executive Director for Programs and Campaigns of Living Laudato Si' Philippines, a member of the Withdraw from Coal network. He is a climate and environment journalist since 2016.
May 05, 2022
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