DOF chief underscores critical role of finance in fight against climate change

Finance Secretary Benjamin E. Diokno has underscored the critical role of finance in the country’s fight against climate change and highlighted the Department of Finance’s (DOF) initiatives on this front.

“Recognizing the indispensable role of finance in the fight against climate change, the Department of Finance is proud to be a fierce advocate and one of the earliest adopters of climate policy in the Philippine government,” Secretary Diokno said in a recorded message to the Climate Investment Forum 2023.

Through the Inter-Agency Task Force on Sustainable Finance (ITSF) or “Green Force”, the DOF is building a sustainable finance ecosystem to synergize public and private sector investments.

The Green Force, co-chaired by DOF and the Climate Change Commission (CCC), is tasked to carry out a comprehensive review of the sustainable finance landscape in the country, identify gaps in the market, and develop plans and recommendations to advance the Philippines’ sustainable finance agenda.

On November 24, 2023, the Green Force convened to discuss progress in developing sustainable finance policies and mobilizing finance towards climate adaptation projects, while finalizing preparations for the Philippines’ participation at the Conference of the Parties or COP28.

The Department of Environment and Natural Resources (DENR) and CCC, together with DOF and other relevant agencies announced the completion of the country’s National Adaptation Plan and Nationally Determined Contribution Implementation Plan, with the corresponding financing plans underway.

Meanwhile, the Financial Sector Forum, composed of the BSP, Securities and Exchange Commission (SEC), Insurance Commission (IC), and Philippine Deposit Insurance Corporation (PDIC), is pursuing more initiatives in greening the financial system following the development of the Philippine Sustainable Finance Taxonomy Guidelines, which will be finalized early next year. The Securities and Exchange Commission presented the Sustainable Finance Initiatives in the ASEAN.

In 2021, the Green Force was able to launch the Philippines’ first-ever Sustainable Finance Roadmap, which outlines a whole-of-government approach to promote sustainable finance.

Secretary Diokno identified three areas that the Roadmap addresses, namely: policy, financing, and investment.

To address the policy gap, the government must establish a conducive policy environment for sustainable finance to flourish.

“This requires integrating sustainability into macroeconomic policies and regulations; strengthening coordination within the financial ecosystem; embedding sustainability into the risk management of the banking, insurance, and asset management sectors; encouraging sustainability and climate-related disclosures; conducting capacity-building; and actively participating in international initiatives on sustainable finance,” Secretary Diokno said.

Meanwhile, addressing the financing gap involves mainstreaming sustainable finance across the board by promoting sustainable financial products; improving the definition of sustainable finance and creating a principles-based taxonomy; and tracking sustainable finance flows.

To this end, the government is pushing for the development of a Climate Finance Data Platform, which is designed to complement the Sustainable Finance Taxonomy Guidelines for clarity, transparency, and efficiency in the sustainable finance ecosystem.

The centralized platform will efficiently track sustainable finance flows, which will reduce information gaps and avoid mismanagement of data and information. Moreover, this will reduce the possibility of having redundancies in funded projects and investments.

“On the ground, sufficient sustainable finance information will ensure the alignment of incentives, accurate measurement of results, proper valuing of assets, and effective management of risks,” Secretary Diokno said.

Finally, the Roadmap highlights the need to effectively develop a sustainable pipeline of investments.

On this front, domestic banks have voluntarily adopted sustainability principles, as well as environmental and social risk management in their operations.

The Finance Chief cited that the largest banks in the Philippines, such as BDO and the Bank of the Philippine Islands (BPI), have created Sustainable Energy Finance Desks to evaluate and monitor sustainable energy projects. The program is designed to encourage local enterprises to invest in renewable energy and energy efficiency solutions.

Secretary Diokno also highlighted the private sector’s role in further steering climate action through investments, noting that DOF continues to promote a fiscal incentives regime that rewards innovation and prioritizes climate-related investments through the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

On the part of the government, it launched the Sustainable Finance Framework which is a blueprint for supporting the country’s sustainability commitments and raising Green, Social, and Sustainability Bonds, Loans, and other debt instruments.

From March 2022 to early 2023, the Philippines has already issued a total of US$ 3.6 billion worth of sovereign bonds under the Framework.

The Finance Secretary also shared the People Survival Fund (PSF) Board’s historic approval of approximately US$ 10 million worth of climate adaptation projects to be implemented by local communities all over the Philippines.

The Fund will boost local communities’ climate resilience and adaptive capacity through science-backed and nature-based solutions.

Secretary Diokno likewise emphasized that sustainability is a whole-of-nation approach.

With this, he urged partners in the business industry to faithfully comply with the Extended Producer Responsibility (EPR) Act of 2022, which aims to promote a circular economy that minimizes pollution while maximizing the use of materials.

In line with this endeavor is the proposed measure to impose an excise tax on single-use plastics (SUPs) to curb plastic pollution and generate revenues that will further the country’s climate commitments.

“The Philippine government is aggressively covering every front and laying the groundwork for enabling a just transition where every sector, every community, and every individual can thrive,” Secretary Diokno said in closing.