The Bangko Sentral ng Pilipinas, or BSP, will expand financing of private banks for sustainability projects in line with the government's commitments to carbon footprint reduction.

The BSP also approved a gradual reduction in reserve requirement of banks for sustainable bonds from 3 percent to 0 percent.

The central bank will allow a reduction by 200 basis points from the effectivity of the policy and another 100 basis points in the succeeding year.

"We will identify and create appropriate incentives that are within our mandates empowering the banking system to steer capital flows toward growing green or sustainable investments and accelerate the development of solutions addressing just transition and adaptation-related challenges," BSP Governor Eli Remolona Jr. said.

"The policy may be further reviewed as warranted by circumstances," he added.

Heading off greenhouse backlash

The BSP reported universal banks in mid-2022 approved sustainability loans worth at least P830 billion and $14 million or around P780 million from commercial banks.

The central bank added that such financing was provided by 75 percent of universal and commercial banks surveyed.

"The top five sustainable projects supported by these banks are renewable energy, sustainable water and wastewater management, energy efficiency and green buildings," the BSP said.