August 20, 2021
“Banks are implementation ready. We are already strictly regulated by the Monetary Board and the Central Bank, so if they issue more guidelines we’ll just follow it. We do a lot of project finance and we analyze all the risks anyway – we try to factor that in,” said BDO Capital President Eduardo Francisco in a webinar on the fiduciary responsibilities of corporate directors today organized by the Institute of Corporate Directors (ICD) in partnership with the Institute for Climate and Sustainable Cities (ICSC), The Climate Reality Project Philippines, and ClientEarth.
BPI Vice President Jo Ann Eala said they take both climate and environmental risks and opportunities into consideration in their projects. “We have to make sure that the projects that we support, and we fund are actually making money and profitable, meaning the project is sustainable. It is important that the project can sustain itself financially.”
Bangko Sentral ng Pilipinas Assistant Governor Lyn Javier called to enhance risk management by looking at different types of risks, increased transparency to stakeholders, and reskilling of personnel on sustainability agenda. “When we understand risks we also see the opportunities behind investing in sustainable projects.”
The webinar launched the report Analysing Energy Transition Risks in the Philippine Power Sector by ICSC, the Institute for Energy Economics and Financial Analysis (IEEFA), and Carbon Tracker Initiative (CTI). The study demonstrates in detail how and why “stranded asset risks for coal power plants in the Philippines will likely materialize independent of additional policies on renewable energy.” Renewables, on the other hand, due to their deflationary costs, will continue to disrupt and transform power markets across the globe.
“The intermittency of coal has been proven earlier this year, with the rotating brownouts caused by the breakdown of major coal plants old and new in the country. More and more financial institutions and banks are fleeing the plunging investment prospects associated with fossil fuels. Costs of renewables and storage continue to fall providing in more and more cases the most attractive investment option in terms of price and reliability. Inevitably, all coal power plants will be stranded assets,” said ICSC energy transition advisor Alberto Dalusung III while presenting the highlights of the report.
Findings of the report also showed that the key to minimize stranded cost risk and ensure a least-cost power system in the Philippines is proactive policy making, to which ICSC, IEEFA, and CTI offered policy recommendations including the need to fast-track renewable energy auctions, enforce mandatory removal of cost pass-throughs to end-users, improve tariff setting, build on the current moratorium, and increase clarity on who pays for stranded asset risks.
On the issue of financing gap, Dalusung stressed the need for banks to change how they assess investments. “The vision, framework, and targets for the transition into a sustainable and resilient society will remain out of our hands if we fail to fill in the financing gap that will significantly expand access to renewable energy. Banks must look into their financial structures, rules, criteria, and institutions that govern the sector, capital markets, and investment. There is a need to see increased applications and opportunities that will lead to solutions and emerging investment opportunities for action on climate change and sustainable development goals. This can be done if the banking sector relies on data and numbers, instead of going back to outdated optics, that will give them a full picture of the investment landscape for renewable energy,” he said.
“The legal and financial imperatives for robust integration into risk management, governance, and disclosure are clear. The energy transition presents risks and opportunities for Filipino banks. Good governance practice today requires contemporary understanding, proactive inquiry and critical evaluation on a forward-looking basis,” said Ellie Mulholland, Director of Commonwealth Climate and Law Initiative.
Jamie Sawyer, climate finance lawyer from ClientEarth, cited the experience of corporate directors in minimizing climate risk in the international arena. “We have seen a significant shift towards shareholders’ support for climate resolutions at annual general meetings and investors working together to communicate their expectations of the banks that they invest in. We expect this shareholder pressure to continue to gain momentum as more investors join the call for banks to align financial flows with Paris-compatible pathways,” she said.
“Transitioning to renewable energy will ensure energy security and self-sufficiency. Even if we remove climate and Paris agreement in the equation, the government and private sectors have to accelerate energy transition based on a purely economic standpoint,” said ICSC Executive Director Red Constantino.
This press release was originally published at the ICSC’s website.
To watch the webinar and access more information about it, click here.