In a significant move to accelerate climate-aligned investments, the Bangko Sentral ng Pilipinas (BSP) has decided to prolong crucial regulatory incentives for banks engaged in sustainable financing. The Monetary Board has officially approved the extension, ensuring these measures remain in effect for an additional two years.
Key Regulatory Incentives for Green Projects
The extended framework, initially launched in 2023 via BSP Circular No. 1185, provides banks with two powerful tools. First, it permits them to exceed the standard 25 percent Single Borrower’s Limit (SBL) by up to an extra 15 percent when financing eligible green or sustainable initiatives. Second, it allows banks to lend out all capital raised from issuing sustainable bonds, exempting these funds from the usual 3 percent reserve requirement (RR).
This extension means the incentives will stay active for another two years starting from 06 January 2026. The central bank's goal is to maintain the current momentum and encourage financial institutions to scale up their support for projects that benefit the environment.
Driving the Transition to a Climate-Resilient Economy
BSP Governor Eli M. Remolona, Jr. emphasized the strategic importance of this decision. He stated that the BSP is committed to supporting the shift toward a climate-resilient economy. By offering these targeted incentives, the BSP aims to channel more credit into sustainable activities while simultaneously strengthening the domestic capital market and attracting a broader base of issuers and investors.
The extended incentive period is projected to facilitate continued funding for a wide range of critical sectors, including:
- Renewable energy generation
- Water and wastewater management systems
- Clean transportation solutions
- Climate-resilient infrastructure development
These priority areas are closely aligned with the country's key strategic plans: the National Adaptation Plan (NAP), the Nationally Determined Contributions (NDCs) under the Paris Agreement, and the Philippine Development Plan (PDP).
Future Steps and Broader Strategy
Looking ahead, the BSP is not stopping with this extension. The central bank is actively studying the recalibration of risk weights for financing focused on climate resilience. This review aims to ensure that the prudential treatment of such exposures remains appropriate and responsive to the Philippines' unique domestic circumstances.
Furthermore, the BSP is exploring blended finance mechanisms. This involves collaborating with government agencies, development partners, and the private sector to help de-risk sustainable and climate-resilient projects. Such partnerships are crucial for broadening investor participation and unlocking larger pools of capital.
Before the newly extended two-year incentive period concludes, the BSP has committed to conducting a comprehensive review. This assessment will examine market conditions, the utilization rates of the incentives, and identify any necessary refinements. The ultimate objective is to further scale up adaptation financing and robustly support the nation's long-term climate and development ambitions.
