The Bangko Sentral ng Pilipinas (BSP) said Friday its policy-making Monetary Board approved the adoption of the Philippine Sustainable Finance Taxonomy Guidelines (SFTG) for banks to promote sustainable finance.
The SFTG is a classification tool for identifying whether an economic activity is environmentally and socially sustainable.
BSP Governor and Monetary Board chairman Eli Remolona Jr. said the issuance of a taxonomy is a crucial step in our sustainability journey. “It provides high level guidance in determining the greenness of an investment. But this is just the first step to what I expect will be a long iterative process of calibrating the document to fully capture the conditions of the Philippine economy,” he said.
The first version of the SFTG focuses on two environmental objectives such as climate change mitigation and climate change adaptation. Future iterations will cover biodiversity and circular economy.
The SFTG uses the traffic light system such as “green,” “amber” or “red” in classifying an activity: “Green” is for to SFTG-aligned activity, “amber” for partially aligned and “red” for not aligned. An “amber” classification includes activities that are in transition to remedy an actual or potential harm done.
This also includes activities that are considered enablers of climate change mitigation and adaptation objectives.
Meanwhile, a “red” classification means that the activity does not meet the higher ambitions of the SFTG, but these activities may still be eligible for ‘unlabeled’ financing.
The taxonomy provides a simplified approach in assessing the economic activities of micro, small and medium enterprises (MSMEs). This recognizes the important role of MSMEs in the economy and aims to promote financing to the sector.
The BSP would provide an observation period until the end of 2024 to give banks ample time to increase familiarity and understanding of the SFTG principles.
It said a pilot testing exercise would be conducted in partnership with the industry. The results of the exercise will also inform the development of additional guidance on the use of the taxonomy.
The SFTG is aligned with the country’s national policies and strategies and is consistent with the regional ASEAN Taxonomy for Sustainable Finance.
It operationalizes one of the recommendations in the Philippine Sustainable Finance Roadmap, which was released in October 2021 by the Inter-agency Technical Working Group on Sustainable Finance or the Green Force.