The Bank of the Philippine Islands (BPI) is seeing an increased focus on sustainability and integration of sustainability principles in more local companies as performance is measured through Environmental, Social, and Governance (ESG) scores amid the COVID-19 pandemic.
BPI Corporate Banking Head John-C Syquia said ESG scores, which socially conscious investors use to make investment decisions, have become an important component of business operations.
“Companies are realizing the need to integrate sustainability principles, including those covering environmental and social risk areas in their corporate governance framework, as these would allow them to execute business strategies without incurring too much risk,” said BPI Corporate Banking Head John-C Syquia.
The government is likewise recognizing the relevance of ESG scores for businesses, following the issuance of the Securities and Exchange Commission (SEC) of its Memorandum Circular 4, Series of 2019. This requires more information outlining ESG scores. With this, more companies are now expected to comply with ESG reporting.
BPI, for its part, improved its ESG ratings during the pandemic period. MSCI ESG, the world’s largest provider of ESG indexes, upgraded the Bank’s rating from BBB to A.
“To continue improving ESG ratings in local businesses, the government and the private sector need to work together. For example, in energy generation, we need to incentivize renewables to replace fossil fuels as the primary energy source in the long run,” he said.
Mr. Syquia also urged more companies—be it large or small—to identify ESG factors that will minimize and manage the impact of the coronavirus on investors and businesses to avoid long-term risks and losses.
According to KPMG International Cooperative—one of the leading multinational accounting organizations—the importance of ESG has been amplified because of COVID-19, with banks having a critically important role to play in providing essential support to customers and businesses and their employees.
It said that financial support and forbearance measures that banks have put in place during the pandemic have been a fundamentally important aspect of enabling industries and communities to weather the storm.
Currently, BPI is enhancing its Sustainability Strategy Framework in compliance with the BSP Circular 1085 Sustainable Finance Framework issued on April 29, 2020.
Green Financing
As one of the few Philippine banks that has a dedicated Sustainable Development Finance unit, BPI has been advocating sustainable finance programs to address income inequality by offering products that demonstrate and manage ESG issues as a long-term driver of market value.
“Green financing is important to us and we generally provide better terms compared to the conventional loans, for example, renewable energy vs fossil financing. Our energy loan mix as at end-2019 was 38:62, 38 for renewable and 62 for fossil, vs the country’s 21:79 ratio,” explained Mr. Syquia.
BPI’s Sustainable Development Program (formerly called Sustainable Energy Finance Program) has been running since 2008 and has funded cumulative loans worth over Php 141.3 billion or a total of 344 projects as of December 2019.
This program gained international recognition and investor support when BPI offered the lowest-priced US$-denominated bonds and the negative-yielding CHF-denominated BPI Green Bonds in 2019.
BPI also recently issued and listed its social bond, a peso-denominated BPI COVID Action Response (CARE) Bond, under its Sustainable Funding Framework, to finance eligible Micro, Small and Medium Enterprises (MSMEs), one of the sectors hardest-hit by COVID-19. The Php 21.5 billion CARE Bonds have a tenor of 1.75 years, and an interest rate of 3.05% p.a., paid quarterly.
BPI’s sustainability and banking services have been recognized by FinanceAsia and The Asset financial publications.
BPI is also offering its Sustainable Finance program for corporations and SMEs to manage risks.
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