Sitting throughout the storm belt, the Philippines is probably the most uncovered nation to tropical storms. Like many Filipinos who reside with the truth of getting to batter these harmful storms and catastrophic flooding, veteran banker Atty. Federico P. Tancongco additionally has a private story about surviving a storm.
In 2019, the archipelago skilled a Pacific storm season that was the most costly ever recorded. “There was one Saturday I used to be simply working from my workplace in Makati and a workers member from the reception got here to inform me I needed to transfer my automotive because the basement was flooded and filling up with water. I stepped out and it regarded like many elements of the Makati enterprise district was beneath knee-deep water,” he remembers.
Tancongco, the senior vp and chief compliance officer of BDO Unibank, says it was probably the most harrowing, first-hand expertise he has had with a catastrophe occasion, having grown up within the southern a part of the Philippines, which hardly ever sees typhoons. “It jogged my memory of how actual the local weather dangers are and made me realise time isn’t on our fingers,” he stated of the expertise, including that storms and cyclones are intensifying and turning into more and more unpredictable with local weather change.
That day, Tancongco had little selection. He left his SUV at a mall and waded by way of chest-deep water from Makati, the nation’s monetary hub within the Metro Manila area, to his residence in Pasig, nearly 10 kilometres away, to seek out that your entire first ground of the home was flooded. “What was in entrance of the home nearly regarded like a raging river,” stated Tancongco. The household shortly determined to climb up onto the roofs, with Tancongco resorting to tying bedsheets right into a rope which he tied between their second-storey balcony to the balcony of a better adjoining house. Swimming in opposition to the currents to safe the “escape route”, Tancongco managed to assist most of his neighbours make the tough crossing, the place they might await assist. which he tied between their second ground balcony to the balcony of
It’s these tangible, life-threatening incidents that warrant a more in-depth have a look at local weather resilience, particularly from financiers, Tancongco notes. Past floods and typhoons, extreme and excessive water shortage exists in elements of Luzon, he provides, particularly within the better Metro Manila area and close by provinces the place many Filipinos expertise water stress.
Earlier this yr, BDO Unibank launched an influence report on blue bond financing – a kind of financing mechanism particularly designed to assist sustainable water- and ocean-related initiatives. The report particulars outcomes achieved corresponding to water saved from groundwater extraction, averted water loss, and wastewater handled from initiatives funded from the proceeds. The lender raised US$100 million from its maiden issuance of blue bonds by way of an funding from the Worldwide Finance Company (IFC) in Could 2022 – the primary non-public sector issuance of this rising financing instrument by a industrial financial institution in Southeast Asia.
On this interview, Tancongco shares extra about how this partnership took place, and the progress of an power transition financing assertion the financial institution launched in August 2022, pledging that it’ll scale back its coal publicity by half by 2033.
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We agree with the regulators that borrowing limits mustn’t turn out to be a hindrance to the implementation of inexperienced initiatives. When there are points at a statutory or congressional stage the place we assume the federal government ought to play a stronger function in driving initiatives, we push for that too.
How have your particular personal experiences impacted your work?
I imagine my private experiences have taught me the significance of resilience and that time isn’t on our fingers.
Climate patterns are additionally altering and transcend floods and typhoons. We’re now seeing droughts in locations as soon as thought drought-free, which has led to water stress. Our blue bond issuance comes at a crucial time and is our emphasis now. The Philippines is an archipelagic nation composed of seven,641 islands and water provide is erratically distributed. In lots of locations, obtainable water can not sustain with fast-rising demand, and assets are working out. The dangers are actual and we now have to assist native communities adapt and transition.
The impacts of marine air pollution can also be a difficulty. Plastic waste from the “single-use sachet economic system” chokes the Philippines and stable waste administration remains to be poor. This in flip impacts tourism. You may’t have tourist-friendly seashores when plastics and litter are washing up in your shores. We hope the issuance of blue bonds can assist change this.
What led to BDO choosing blue bonds as a financing mechanism?
We now have been companions with IFC for greater than 10 years and so they perceive our financing framework and philosophy. We additionally understood that for the Philippines to broaden its renewables sector, clear power must come from the hydropower from rivers and offshore wind. These are methods for proceeds from blue bonds to contribute to a sustainable economic system.
It additionally demonstrates how the board now more and more understands the necessity to debate local weather and environmental points past the angle of dangers. We must proceed to arrange the board, develop our metrics and method, and our standpoint, in order that we will rigorously articulate how we wish to be a catalyst within the environmental, social and governance (ESG) area. The opposite banks look to us and we wish to present them that there’s good enterprise in ESG.
Plastic waste washes over the port district in Malate, Metro Manila within the Philippines. Picture: AdamCohn, CC BY-SA 3.0
What function does the financial institution wish to play on this facet and what has it been engaged on?
We’re constructing the technical capability and competencies of our sustainability workplace by increasing it and making it extra environment friendly by way of expertise and analytics. BDO is a conglomerate of 27 firms, consisting of three forms of banks: a common financial institution, a small and medium enterprise financial institution, and our native banks. We additionally assist our philanthropic purchasers to handle wealth. We wish to leverage our understanding of those totally different purchasers, all of whom have totally different wants and [risk] appetites.
After we have a look at the laws within the Philippines, we all know that sustainability practices must evolve. We advocate for ESG with different banks and the regulators. For instance, we commend the Bangko Sentral ng Pilipinas (BSP) for its exception to the Single Borrower’s Restrict [a rule that limits or restricts a bank’s risk of exposure to single borrowers]. We agree with the regulators that the restrict mustn’t turn out to be a hindrance [to the implementation of the project]. When there are points at a statutory or congressional stage the place we assume the federal government ought to play a stronger function in driving initiatives, we push for that too. The federal government must guarantee traders that inexperienced initiatives won’t immediately be affected by a change in guidelines or insurance policies.
Has it been difficult enjoying that function?
The BSP, our central financial institution, may be very proactive. They wish to see what is occurring within the area and be extra concerned in present conversations.
For instance, the regulators have stated they’ll revise the sustainability reporting pointers and align themselves to new Worldwide Sustainability Requirements Board (ISSB) guidelines. They’re in line with the newest ESG reporting developments.
However we additionally can not observe North America and Europe in every part they do; the change needs to be particular and throughout the Philippine context. BDO has been a part of a transition finance examine group consisting of among the largest Asian banks since 2021 and we now have been exploring find out how to put in context Asia’s transition finance mechanisms with the world’s. It’s difficult work as a result of you need to be context-sensitive. Totally different nations are at totally different ranges of their inexperienced transition journeys. Some are starting to embed European Union-led guidelines of their processes whereas others must be additional empowered, for instance with expertise. If the transition doesn’t occur easily, it might break them and so they might take a very long time to recuperate.
Are you able to give us some examples of how BDO has been approaching transition finance otherwise as in comparison with the West?
Distribution of renewable power is difficult within the Philippines. In case you are considering of doing that through ocean cables, you’ll kill the challenge with the massive prices. For now, we’re nonetheless depending on fossil fuels, however BDO has been financing renewables nationwide for over a decade.
Within the mid-Eighties to late Nineties, the Philippines skilled brownouts [a reduction in voltage levels] for 5 to eight hours each day. Subsequently, in our power transition finance assertion launched in August 2022 – during which the BDO board declared that the financial institution has ceased financing new coal capability since 2019 and can impose stricter situations for coal-related financing and speed up the renewables push – we additionally stated that in a state of affairs the place the Philippine authorities implements provisional emergency measures to handle an power disaster, or to the extent that the nation’s power assets can now not meet its power calls for, we are going to take a pause. We are going to rethink the extension of capital [for coal projects]. That is totally different from what banks and firms in Europe are doing. They appear to deal with their sustainability statements like press releases and now have to begin strolling again on a few of their commitments. We additionally really feel that it’s unfair that the local weather burden is on us when the Philippines contributes little or no to greenhouse gases, but suffers from probably the most variety of typhoons.
We now have additionally elevated give attention to supporting the micro, small and medium enterprises (MSMEs). The transition of communities and employees who might need their jobs and livelihoods impacted throughout a inexperienced power transition is our precedence. Our subsidiary BDO Community Financial institution is concentrated on MSMEs and was bodily current on the bottom to make sure the transition continued through the Covid-19 disaster. Everyone knows that there was an explosion of on-line transactions through the pandemic, however the untold story is that lots of people nonetheless wanted money for a way of safety, say for hospital payments. So we would have liked to place boots on the bottom. This can’t be performed “on the cloud”.
Micro, small and medium enterprises stay a precedence in BDO Unibank’s outreach. Picture: Hitoshi Namura / Unsplash
Our financial institution branches at the moment are in 94 per cent of the barangays or the smallest native authorities unit within the Philippines. The communities dwelling there will likely be impacted by local weather change in several methods. They’ve particular wants as some are fisherfolk, some are farmers and a few work in cottage industries. Monetary inclusion and literacy are additionally essential.
What’s the present progress of commitments made beneath the power transition finance assertion?
We’re on monitor with our dedication to cut back our publicity to coal. Within the foreseeable future, we won’t stroll it again. If we do properly on the inclusion entrance, we might speed up it [and reduce our coal exposure by half before 2033]. There may be new expertise and we’re starting to know our purchasers and merchandise. The rise in understanding shortens the interval of transition. I’m hopeful however it’s guarded optimism.
Proper now, we now have to proceed educating the board, particularly on the company governance stage. What has modified is that almost all board members now have a missionary zeal in direction of ESG and the transition assertion has turn out to be our Bible for danger administration. For a lot of board members, ESG points have now turn out to be their private legacy; sustainability is now about survival and enterprise, and goes past danger, compliance, communications and branding. We even have to begin embedding sustainability in all our selections, together with who we resolve to work with.
Do you foresee BDO at any cut-off date reviewing the assertion to deliver the goal nearer to any time earlier than 2033?
We intend to overview the assertion usually and base it on the environment and social danger administration metrics. The committee meets month-to-month and we glance throughout our funding and mortgage portfolio. We would nonetheless have fossil fuels on our books, however at this stage, we might moderately do our greatest to interact with our purchasers [fossil fuel companies] on transition as an alternative of dropping them. In our assertion, we additionally stated we are going to present entry to capital for communities and people that will likely be affected by the transition. That is our ecosystem method to transition and our approach of guaranteeing that nobody is left behind.
