VICTOR C. ABAINZA Senior Consultant, ADFIAP Consulting Group Quick - - PowerPoint PPT Presentation

Regional Workshop on Scaling-up Climate Finance: Urgencies to Increase Public and Private Sources for Climate and Disaster Resilient Development PHILIPPINES Country Survey Results Presentation

VICTOR C. ABAINZA Senior Consultant, ADFIAP Consulting Group

• ESCAP’s “Innovative Climate Finance Mechanisms for Financial

Institutions in the Asia-Pacific Region” Program

• CCC’s “whole of nation movement” for innovative and transformative

green development of the Philippines called, “The Great Transformation Challenge”

• ADFIAP as implementing organization
• WWF and BAP as supporting/partner organizations

Quick Background

Strengthen capacity of FIs to develop an enabling policy environment that promotes private investments in climate change mitigation and adaptation projects Involves consultations with banks, including a survey to collect baseline information on level of ESR awareness and help design a capacity-building program to integrate sustainability and climate change risks and opportunities in their operations

Quick Background

Main Activities

Activities Description Responsible Entity Time Frame 1 Conduct a survey to assess baseline of how banks take into account climate risks and their green product offering. A gap analysis

• f the results will be carried out and a

customized capacity development plan will be prepared for participating banks ADFIAP with BAP’s support January 2019 – March 2019 2 Conduct a ”Sustainable Finance Forum” where terms and “universe” of green investments will be defined through a clear framework and where the results of the survey will be shared UN- ESCAP/CCC/ ADFIAP/WWF/ BAP April 2019 3 Sponsor a voluntary “Green Finance Roadmap” that banks can sign up to committing to mobilize green investments and champion green finance in the Philippines UN- ESCAP/ADFIAP with BAP’s support April 2019- May 2019

Main Activities

Activities Description

Responsible Entity Time Frame

4 Conduct awareness -raising seminars and implement capacity-building programs and e- learning modules

UN- ESCAP/CCC/ ADFIAP/WWF /BAP June 2019 – August 2019

5 Engage the BSP in coming up with a policy action plan

CCC with BAP’s support April 2019 - September 2019

6 On Hold Give “Climate Leadership Awards” during one

• f the special events of BAP, BSP or CCC

ADFIAP with BAP’s support October 2019

7 On-Going Organize and launch a “Climate Finance Community”, a mobile-friendly website & virtual community that will serve as platform for building collaboration among different stakeholders within the climate finance

ADFIAP April 2019 to December 2019

E&S MATURITY PROFILE

*E&S : Environmental and Social Report made in 2017

Where we are: E & S* Maturity Profile

Survey Rationale

To determine the training needs of BAP member-banks and design a capacity- building program to better integrate sustainability, climate risks, and business

• pportunities into their
• perations.

Awareness and Perception to Environmental & Social Risk Management (ESRM)

Survey Participants

7+ Trillion combined assets 20 banks; 13 local ; 12 in top 20 based on

asset size and 9 have mobilized funding from international / DFI sources

Top 3 Investment Portfolios

71% Power & Energy 50% Real Estate 43% Retail / Trading

Highest portfolios are climate change & ESRM relevant

70% Renewable Energy & Energy Efficiency

Current Lending Programs

A few have climate resilience, clean transportation, sustainable water and water management facilities

95% see opportunities and benefits:

 Believes involvement in green finance or climate-smart projects will enhance reputation and strengthen brand value  Sees green finance business can deepen relationship with existing clients  Attracts investments from international FIs/DFIs that support E&S

Other Survey Highlights

Top 3 Drivers to Lending

58% say it will improve the credibility and

reputation

47% say potential new businesses can

be tapped from the market It may improve portfolio risk

Other Drivers (below 35% score)

Competitive pressure to comply with international best practice Due to legislation including labor, health, safety and environmental laws Financial sector regulation on climate change and ESRM Requirement from parent company Requirement from source of funding / DFIs

More importantly, 100% believes…

That “greening” the bank and/or enhancing environmental and social risk management will…  Tap new markets and attract new clients; and  Improve financial and non-financial performance of the Bank.

Partnerships can be forged and may attract funding to finance green or climate-smart projects.

Opportunities are open!

47% 47%

“It makes a lot of business sense to go into green finance

• r climate-smart projects for as

long as environmental and social risks are managed well.”

Conclusion No. 1

57% Absence of regulations/guidelines

• n ESRM for FIs

50% Absence of ESRM laws and

regulations

36% -Lack of internal capacity for FIs

• High cost of implementing ESRM

Top Constraints to Climate Finance & ESRM

Difficulties in Launching/Expanding Green Finance Funding High cost, low return Political risk Market risk No incentive from regulator

The Need for Effective Management

82% sees increased operational costs 35% says it will result to reduced

competitiveness

35% believes it will redound to loss of

clients

Standards & Tools to Manage E & S Risks

33% use :

 IFC Performance Standards  National legislative requirements

28% use Equator

Principles

22% no standards used 47% Embedded in

credit evaluation, i.e., credit scoring

26% IFC categorization 26% Third party E&S

risk assessment

63% has sustainability or ESRM policy in place, including

screening procedures for lending or investments Elements covered by Bank’s E & S Mgmt. System

37% has ESRM checklists incorporated at key points in

the lending or investment cycle

37% benefit from internal ESRM staff training but only

10% have incentive schemes to motivate credit/ investment

• fficers to consider ESRM risks

For those who monitor,

50% of the banks

indicated that there were no disapprovals of loans due to climate finance and E&S issues while the other

50% experienced

rejection.

Rejection Rate

ESR is appreciated but…

83% recognizes climate change and ESR as business

risks and reflected in bank’s organizational policy

63% consider climate finance and E&S issues in the

approval process Yet 32% does not require any environmental permit from clients during due diligence process which is vital

Conclusion No. 2

Capacity-building is necessary because there:

• Is lack of awareness on ESRM regulations, i.e.,

requiring environmental permits

• Are only about 37% who are trained, hence green

finance or climate-smart projects are not extensively tapped

• Are about 22% of the FIs do not use or unaware
• f any standards to be able to assess projects better

and improve approval rate, or may not have a lending framework

58% has E&S performance metrics in their

management systems Only 41% report to a regulator/DFI/ stakeholder on climate smart/green loan performance Only 13% say they encountered a loss due to poor E&S performance

Monitoring & Reporting

Responsibility Sharing

Business / Credit Dept Risk Mgmt Legal Compliance Investor Relations

Available Resources

 Contract consultants via technical assistance  Dedicated budget for green loan activities  IT systems

88% say that about 15% of

staff have attended green finance or ESRM training

70% say that senior

management (CEO, BoD) have been exposed to green finance training

56% used consultants to

assist in climate-smart/green finance/ESRM implementation

Training & Consultants

86% Easy access to

information e.g., tools resources, guidance, best practices

56% Annual training

program with several training events per year for selected staff

56% On-going technical

assistance/ on-the-job training

Top Training Models of Choice

84% To conduct awareness-raising workshops, training

events, conferences and seminars for management and staff

58% To provide advisory service for developing ESRM

internal policies and procedure, developing business

• pportunities and new products

47% To provide financial resources to build internal

E&S systems and capacity Suggested BAP Support to Green Finance/ E&S

For green finance/investment to be a success: Funding Regulatory support Capacity-building of bank staff involved in green finance Policy support from BSP / guidance in standardizing best practices

Support Needed

Apart from capacity-building, BAP’s assistance to the banks could include : Coordination with BSP and other government agencies to support their green initiatives Information on best practices on green finance/investment

Conclusion No. 3

ADFIAP in partnership with BAP and support from WWF will:  Formulate and implement a capacity-building curriculum

• n green finance and ESRM based on the results of the

survey.  Hold customized awareness-raising programs at the Board and senior management levels to secure “buy-in” and undertake bilateral capacity-building activities.  Coordinate with BSP and other government agencies to support bank initiatives.

Next steps…

UN ESCAP will… Draft a non-binding charter for banks to sign indicating support measures to enhance sustainable finance/investment actions in the Philippine banking sector by 2030.

Next steps…

End of Presentation

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