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ING Bank sees more sustainability bond issuances

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ING BANK N.V. Manila expects more issuances of sustainability bonds from lenders and corporates this year, partly driven by the Bangko Sentral ng Pilipinas’ (BSP) push for this type of financing.

“I think everybody’s trying to look at how they can do it. When I talk about sustainability, it’s not just environmental or green — we also talk about social. When you talk about social, it can be, for example, low-cost housing… We’re also helping to encourage our partners towards that,” ING Bank Philippines Country Manager Jun Palanca said in an interview with BusinessWorld last week.

“We’re seeing quite a bit more now at least in the pipeline. So, assuming all of those close by this year, I think there will be more,” Mr. Palanca said.

He added the central bank’s push for sustainable financing has made lenders more interested in issuing these kinds of bonds.

“That’s top of mind for the BSP with the taxonomy [guidelines] that they released in February. So, they’re encouraging [the banks]. For the banking sector, if you issue a sustainability bond, it has an impact on your reserve requirement as well,” he added.

The BSP in February issued Circular No. 1187 containing amendments to the Manual of Regulations for Banks for the adoption of the Philippine Sustainable Finance Taxonomy Guidelines (SFTG) for banks.

The Philippine SFTG was developed with the help of the Financial Sector Forum, which is an interagency body composed of the BSP, Securities and Exchange Commission, Insurance Commission and the Philippine Deposit Insurance Corp., as part of the commitment of the financial sector supervisors under the Philippine Sustainable Finance Roadmap.

The guidelines serve as a tool to classify if an economic activity is environmentally or socially sustainable to serve as a guide for stakeholders in making investment or financing decisions.

“The SFTG aims to direct, accelerate, and increase capital flows to economic activities that promote sustainability objectives. including reduction of greenhouse gas (GHG) emissions and building climate resilience. It likewise promotes transparency and credibility by minimizing the risk of greenwashing and supports a just transition to a sustainable economy,” the central bank said.

“Banks shall use the SFTG when extending credit, making investment decisions, or designing sustainable financial products and services, among others. In issuing sustainable bonds, banks shall comply with the regulatory requirements articulated in the relevant sustainable bonds standards or guidelines issued by the Securities and Exchange Commission,” it added.

The BSP last week said banks have until the end of this year to comply with the SFTG.

The central bank at the end of last year also approved temporary measures to incentivize banks through extra lending capability and reduced reserve requirement rate for sustainable bonds issued by banks.

Mr. Palanca added that the rising number of renewable energy projects presents opportunities for banks and other firms to expand their sustainable financing portfolios.

“If you are a bank or a corporate, you would want to tap that. You can expand your investor pool, which helps your share price at the end of the day,” he said.

However, these planned sustainability bond issuances could be delayed or adjusted if the BSP’s easing cycle does not begin this year as expected, Mr. Palanca said.

“Notwithstanding, I think there are a number of banks that are still going to the market anyway. So, what they’re doing is they’re shortening the tenor. Instead of three years or five, they’ll shorten it to two, for example,” he said.

ING Bank Manila will also continue to encourage banks to be more sustainable by introducing related products, Mr. Palanca said.

“Sustainability is the heart of ING as a whole and that’s what we want to be known for… We’ve been trying to come up with new products not just on the lending side, but also in the financial market side and the advisory side where we can help our clients or encourage our clients to go through that journey to be more sustainable,” he said.

“In addition to that, we’re also thought leaders in helping our clients through more structured solutions to be able to achieve their goals with a sustainability angle,” Mr. Palanca added. — Aaron Michael C. Sy

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