RCBC has been at the forefront of the Philippine banking industry’s move towards building a climate-resilient and low-carbon loan portfolio. Being in a country that is considered among the most vulnerable to climate crisis makes it imperative for the Bank to play a role in reducing carbon emissions through sustainable finance.
The Philippines ranks 4th among the 10 countries most affected by extreme weather events over the last two decades (2000-2019), according to the 2021 Global Climate Risk Index. Due to its geographic location, the country is regularly exposed to tropical cyclones such as Bopha in 2012, Haiyan in 2013, and Mangkhut in 2018. Given this inherent vulnerability, the Philippines was included among countries still recovering from the previous years’ impacts.
At the 26th United Nations Climate Change Conference of the Parties (COP26) in November 2021, the Philippines presented its newly established Sustainable Finance Roadmap as a model for other emerging economies to incorporate climate and environmental factors in the deployment of funds in support of a sustainable and resilient economy. The Roadmap reinforces the country’s Nationally Determined Contribution (NDC) to the Paris Agreement, where it has committed to a projected greenhouse gas emission (GHG) reduction and avoidance of 75% from 2020 to 2030 for agriculture, waste, industry, transport, and energy sectors. This is a marked increase from its initial NDC of 70% to the Paris Agreement in 2015 which urged country parties to limit global warming to 1.5 degrees Celsius.
The Bangko Sentral ng Pilipinas (BSP) underscores the need for banks to be aware of climate change and manage its associated risks to fully maximize the opportunities for lending or investing in green or sustainable projects. Banks have the ability to design sustainable financing instruments (SFIs) to fund pandemic response and recovery, as well as support other economic activities that contribute to long-term sustainable development.
Sustainable Finance Strategy
RCBC strongly supports the BSP’s call for financial institutions to be enablers of environmentally and socially responsible business decisions.
RCBC is one of the earliest adopters of BSP Circular 1085 which mandates Philippine banks to integrate sustainability considerations in their governance frameworks, risk management systems, strategies and operations. The Bank has been implementing its Environmental and Social Management System (ESMS) since 2011 and its own Sustainable Finance Framework since April 2019.
Sustainable Finance Risks and Opportunities
Banks and financial institutions have a vital role in reducing global warming, supporting the government in meeting its sustainability objectives, and effectively contributing to the UN Sustainable Development Goals (SDGs) and the Paris Agreement.
In a report completed in May 2021, international credit ratings agency Moody’s said major banks in the Philippines have the second-largest exposures to credit risks that are linked to environmental factors, particularly climate change. It said there are five critical sectors to focus on: mining, energy, oil and gas, surface transportation and logistics, steel and chemicals, and building / construction materials. Moody’s disclosed that major Philippine banks have a total exposure of 22% to these five sectors, one of the highest in the Asia-Pacific region. It further noted that countries with inadequate healthcare systems (low patient coverage, few physicians, and insufficient facilities) are expected to be more vulnerable to climate shocks as these can drastically increase the demand for healthcare support and may lead to a collapse of the healthcare infrastructure.
As a leading domestic financial institution and a responsible corporate entity, RCBC is committed to doing its part in the national effort.
In December 2020, RCBC announced it will no longer extend financing to new coal-fired power projects in the Philippines. Its investments in coal exposure will also taper off and remain in the Bank’s books only until 2031. This is a clear demonstration of RCBC’s leadership in shifting financing towards clean energy, supporting the government’s moratorium on endorsements for greenfield coal power plants, and building a more sustainable power supply mix. Since 2012, the Bank has supported around 3 gigawatts (GW) of renewable energy projects (solar, wind, hydropower, and geothermal). It intends to reinforce funding support for renewable energy projects by tapping 12 projects with combined capacity of about 1.6 GW in 2022 and 2023.
Below are RCBC’s initiatives to lower its carbon footprint and support sustainable finance activities to help meet the UN SDGs:
- Transformed its Corporate Head Office in Manila into a LEED Gold-certified building in 2018
- Funded Green Projects that support the UN SDGs, in particular, the Clean Water and Sanitation, Affordable and Clean Energy, Industry, Innovation and Infrastructure, Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, and Life Below Water goals
- Channelled almost Php49 billion to projects and loans that contribute to reducing the carbon footprint of the Philippines
- Funded social projects that support the UN SDGs, in particular, the Good Health and Well-being, Quality Education, Decent Work and Economic Growth, Reduced Inequalities, and Sustainable Cities and Communities goals
- Channelled more than Php18 billion to fund projects and loans that provide access to social needs, directly improving the living conditions of Filipinos
RCBC Sustainable Finance Framework
Under RCBC’s Sustainable Finance Framework, the Bank can issue green, social or sustainable debt instruments. Since the creation of this Framework in 2019 until March 2021, RCBC has raised around USD1.1 billion in green and sustainability bonds. The Bank continues to provide funding support to address urgent needs in clean energy and public healthcare. Its SFIs aim to increase awareness among peer banks and promote a concerted effort towards preventing further damage to the environment and communities.
The March 2021 issuance of the Php17.87 billion ASEAN Sustainability Bond was listed in dual-tenor 2.5- and 5.25-year ASEAN Sustainability Bonds in the Philippine Dealing Exchange. This transaction was the only Php-denominated Sustainability bond to be issued in the country in 2021, and the largest in RCBC’s 61-year of banking history.
In August 2020, RCBC was recognized by the Asian Banking & Finance Awards as the Philippines Domestic Initiative of the Year for Sustainable Financing. This was followed by recognition from the Global Banking & Finance Review in December, naming RCBC as the Best Green Bank Philippines 2020. In January 2022, The Asset Publishing and Research Ltd. recognized the Php17.87B ASEAN Sustainability Bond as the “Best Sustainability Bond”. Much recently, RCBC was lauded as the "Best Bank for Sustainable Development Philippines" at the 2022 Global Banking & Finance Awards.
The world faces unprecedented challenges on account of climate change. Achieving global goals requires the participation of all sectors of civil society. We are ready to do our part.