Banks are showing improved compliance with Agri-Agra lending requirements, partly driven by the government’s push for environmental, social and governance (ESG) policies, a Bangko Sentral ng Pilipinas (BSP) official said Monday.

In an interview after serving as a panelist during an event organized by the Economic Journalists’ Association of the Philippines, BSP Assistant Governor Pia Roman-Tayag said more financial institutions are now complying with lending mandates and are increasingly adopting ESG principles to address governance and management risks.

She explained that several companies in the country, particularly large firms, are early adopters of ESG practices.

In response, she said the BSP is supporting broader adoption — especially among banks — by aligning policies with global standards, including the Institutional Shareholder Services roadmap.

“Recognizing that, you know, not all companies will immediately have the capacity to comply. For banks, we’ve issued our regulations as early as 2020 so our the expectations are clear. They’re also really building up their own capacity. So I could say that more banks are now integrating ESG in their governance and their risk management system,” Roman-Tayag said.

A 2023 BSP survey showed increased organizational awareness of sustainable financing, with about 71.5 percent of respondent banks considering it highly important, up from 70 percent previously.

The same survey found that around 90.3 percent of respondents plan to extend financing to sustainable projects, an increase from 85 percent earlier.

Roman-Tayag said the BSP has introduced several incentives to encourage banks to adopt ESG frameworks. These include additional single borrower’s limits and a zero-percent reserve requirement for sustainable finance counted toward Agri-Agra compliance.

Under the Agri-Agra law, banks are required to allocate at least 25 percent of their total loanable funds to the agriculture and fisheries sector, including a minimum of 10 percent for agrarian reform beneficiaries (ARBs), to promote rural development.

Roman-Tayag added that the BSP’s sustainable finance taxonomy plays a key role in reinforcing ESG adoption.

“We want that to be as granular as possible so it will be clear for them. So, when they make investment decisions, they know they’re aligned,” she said.

Capital market policies

In a separate interview, Roel Refran, chief operating officer of the Philippine Stock Exchange, said the country’s carbon credit market needs a stronger push through legislation to reach its full potential.

Without such a law, he said regulators currently rely on the International Sustainability Standards Board, which provides a global baseline for reporting sustainability-related risks and opportunities.

“Because that is where it begins and ends,” he said, underscoring the need for incentives and high-quality sustainability reporting. (PNA)