Government urges private sector to tap more green financing

MANILA, Philippines — Private companies need to expand their green finance offerings to prepare their business models for the risks posed by climate change.

Finance Assistant Secretary Paola Alvarez said yesterday private firms should contribute in the government’s effort to mainstream sustainable finance as an alternative instrument for funding.

“We see that the private sector will have an essential participation, especially in issuing green and sustainable bonds,” Alvarez said in an online forum hosted by BusinessWorld.

“We also want them to take advantage of this momentum so that they can raise capital for their infrastructure, their businesses, as a recovery measure. [In doing such], we partake not only in greening the financial system, but also helping the private sector look into how climate change affects their businesses,” she said.

Alvarez said the Department of Finance wants the private sector to look into risk exposures due to the climate crisis that may change their business models. The agency is pushing for a change in strategy to mitigate the impact of weather extremities.

Citing the Bangko Sentral ng Pilipinas (BSP), Alvarez said firms threatened by natural disasters expose themselves to the risk of defaulting on their loans.

“The idea here is as early as now, we want the private sector to look into the risk exposures of their portfolios, their investments, because a study conducted by the BSP has shown that those businesses and banks, which have more exposure to climate risks and natural disasters, have a higher chance of defaulting in loans,” the finance official said.

“What we want to do is we want to strengthen the business sector so that moving forward, when we recover from this pandemic, we not only take into consideration the health issue but also the climate issue,” she said.

The Philippines plans to borrow $500 million from the debt market by selling its first-ever green bonds. Last week, Finance Secretary Carlos Dominguez said the government is only waiting for market conditions to improve before proceeding with the offering.

“In the immediate future, we are looking at issuing $500 million in green bonds. We are waiting to see favorable market conditions,” Dominguez said.

At the 26th Conference of the Parties, Dominguez said the government has to work with the private sector on the use of grants, investments and subsidies to minimize the impact of climate adversities.

In line with this, the government has issued the Sustainable Finance Framework, listing ways on how to raise funds through green, social and sustainable bonds, loans and similar instruments.