BSP extends perks to spur green lending

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has extended a set of regulatory incentives designed to encourage banks to step up financing for green and sustainable projects, as part of efforts to support the country’s transition to a climate-resilient economy.

In a statement, the BSP said the Monetary Board approved the extension of incentives, first rolled out in 2023 under BSP Circular 1185, for another two years.

These measures allow banks to exceed the 25 percent single borrower’s limit (SBL) by up to an additional 15 percent for eligible sustainable projects. They also allow banks to lend out all proceeds from sustainable bond offerings, with these funds exempted from the usual three percent reserve requirement.

With the approval, the incentives will remain in place for another two years starting Jan. 6, giving banks more time to build on recent momentum in scaling up sustainable finance.

“The BSP will continue supporting the transition toward a climate-resilient economy,” BSP Governor Eli Remolona Jr. said.

“By providing targeted incentives, the BSP not only channels more credit into green and sustainable activities but also strengthens the capital market, fostering wider participation among issuers and investors,” Remolona added.

The central bank said the extension is expected to facilitate continued financing for projects in renewable energy, water and wastewater systems, clean transportation as well as climate-resilient infrastructure, among other eligible activities.

These are aligned with key government frameworks such as the National Adaptation Plan, the country’s Nationally Determined Contributions and the Philippine Development Plan.

Beyond extending the current incentives, the BSP said it is also looking into a possible recalibration of risk weights for climate resilience-focused financing to ensure that the prudential treatment of these exposures remains appropriate for domestic conditions.

The regulator is likewise exploring blended finance mechanisms with government agencies, development partners and the private sector to help de-risk sustainable and climate-resilient projects and to broaden investor participation.

Before the extended two-year incentive period lapses, the BSP said it would conduct a comprehensive review of market conditions, utilization of the incentives and any refinements needed to further scale up adaptation financing and support the country’s long-term climate and development goals.