THE Philippines, one of the countries that contributes the least – around 0.35% – to global greenhouse gas emissions, is unfortunately ranked among the most vulnerable to climate change. It is particularly prone to hydrological and meteorological events, such as typhoons, with an average of 20 per year.
According to reports from the National Council for Disaster Risk Reduction and Management, the 10 costliest typhoons occurred between 2001 and 2020, eight in the last decade (2011 to 2020). The total loss and damage is said to have reached 322.3 billion pesos. Among the disrupted sectors are the financial and commercial sectors – more than 90 percent of Philippine businesses are micro, small and medium-sized enterprises.
The Philippines, meanwhile, has been identified as the leader in green finance in ASEAN, according to a report by the Climate Bonds Initiative released last year. One of the first green funds made available nationally is the People’s Survival Fund, a long-term funding stream that enables the government to effectively tackle climate change.
He established an annual fund of 1 billion pesos to support:
1. Adaptation activities in the areas of water resources management, land management, agriculture and fisheries, health, infrastructure development and natural ecosystems;
2. Improvements in surveillance of vector-borne diseases triggered by climate change to improve disease control and prevention; forecasting and early warning systems in the context of preparedness for climatic hazards;
3. Institutional development for local government units, in partnership with local communities and civil society groups, for prevention measures, planning, preparedness and management of climate change impacts, including planning emergency, in particular, for droughts and floods in areas prone to extreme weather events;
4. Strengthening of regional centers and existing information networks and, where appropriate, the creation of information networks to support climate change adaptation initiatives and projects;
5. A guarantee of risk insurance needs for farmers, agricultural workers and other stakeholders;
6. Community adaptation support programs by local organizations.
Another example of green finance is a debt instrument known as a green bond. Globally, the very first green bond was issued by the European Investment Bank and the World Bank in 2007. The green bond market has since grown exponentially by around 95% on average, reaching the cumulative issue of $ 1,000 billion in December 2020.
The green bond is relatively new in the Philippines. The very first recorded green bond issue was completed by AP Renewables, a company of Aboitiz Equity Ventures, in 2016 and was worth $ 226 million.
As of August 2020, four banks – Bank of the Philippine Islands, BDO Unibank Inc., China Banking Corp. and Rizal Commercial Banking Corp. – had issued green bonds. Three other private companies – Ayala Corp., Arthaland Corp. and Manila Water Co. Inc. – followed suit. Total bond issuance reached US $ 2.02 billion, making the Philippines the third-largest green bond issuer in ASEAN just after Singapore (US $ 6.02 billion) and Indonesia (2.88 million US dollars).
One issue that has arisen among all of these environmental initiatives is greenwashing, which a former banker brought up in a closed-door discussion I attended recently.
Greenwashing, according to the Corporate Finance Institute, is “when a company spends time and money advertising and marketing that its products or services are environmentally friendly when in fact they are not.” not “. In other words, “a business is considered greenwashing if it spends a lot of time and money advertising and marketing its ‘green’ products or services rather than using that time and money. to implement environmentally friendly practices. “
In the case of green bonds, greenwashing is the practice of diverting the proceeds from these bonds to activities and projects with zero or negative environmental benefits. Can this be resolved? Yes.
Eligible green projects must be defined. Examples of these projects include renewable energy, energy efficiency and energy storage; green buildings and green infrastructure; agriculture, bioenergy and forestry; industrial efficiency; sustainable management of water and wastewater; clean transport; and pollution control and prevention.
It is worth including “negative lists”, such as fossil fuels and other related projects, to include those that are not climate friendly.
Green bond issuers should be able to conduct capacity building activities to educate investors on the benefits and processes and procedures of green bonds.
Emissions must be subject to standards and certification programs such as the Climate Bonds Standard and Certification Scheme. Issuers must also allow external reviews of their obligations, which can be performed by rating agencies such as Moody’s.
Green bond issuers should adopt the principles governing the use of the products, the processes involved in the assessment, selection and management of projects, and the reporting mechanisms for their issues.
They must apply ESG (environmental, social and governance) principles to include the commitment to achieve predefined sustainability goals. It ensures that issuers remain recognized for the proper use of the products. In the event of failure to comply, green bond issuers would have to pay additional interest. For example, a company can link a green bond to a commitment to reduce greenhouse gases. If the business fails, it issues a coupon to investors.
A green bond is an important debt instrument if the issuer remains aligned with the goal of the Paris Climate Agreement, which is to limit global warming to well below 2 degrees Celsius.
The author is executive director of the Young Environmental Forum and a non-resident member of the Stratbase ADR Institute. He completed his course on Climate Change and Development at the University of East Anglia and an Executive Program on Leadership in Sustainable Development at Yale University. You can send him an e-mail at [email protected]