One year after its milestone issuance of green and sustainability bonds, Rizal Commercial Banking Corporation (RCBC) said much has been achieved, but much still needs to be learned about sustainable finance in the country.
“The current COVID-19 global pandemic raises awareness about the vital role that sustainable finance can play in addressing urgent environmental and social needs such as renewable energy, clean transportation, and health care,” said Frederick Claudio, chief risk officer and executive vice president of RCBC.
In 2019, RCBC marked several milestones in sustainable finance, not just in the Philippines, but in the Asean region. In February, it issued the first Green Bond from the Philippines under the Asean Green Bond Standards, raising P15 billion ($290 million). In June, P8 billion ($160 million) were raised from RCBC’s first peso-denominated Sustainability Bond under the Asean Sustainability Bond Standards. This was followed by an additional $300 million in September 2019.
One year later, these bond issuances have funded a total of 9,797 green and social projects amounting to more than P56 billion. Its sustainable lending portfolio comprised 10 percent of its total loans as of end-September 2020.
Under RCBC’s Environmental and Social Management System, all bank loans undergo a vetting process that takes into account the social and environmental impact a project may have on the environment and communities.
“This process takes place before we decide to lend, and continues during the life cycle of the loan contract,” explained Claudio. This system has been in place since 2011 and is aligned with the Bangko Sentral ng Pilipinas Circular 1085 on Sustainable Finance Framework.
As the financing instruments provided an opportunity for investors in the impact-investing space, demand comes from both domestic and overseas markets.
In 2019, RCBC Green and Sustainability bond transactions were oversubscribed and brought in investors from all major financial centers of the world.
“This provided RCBC the early-mover advantage and enabled us to widen our investor base and support for Asean Green and Sustainability bond initiatives,” said Claudio.
RCBC is guided by a Sustainable Finance Framework (SFF) in funding loans and projects that promote sustainable development. This means going beyond motherhood statements and actively meeting the United Nations’ Sustainable Development Goals (SDGs) by investing in renewable energy, energy efficiency, infrastructure, housing, health care, providing employment, education, and sustainable treatment of wastewater, among others. It is estimated that as much as $12 trillion is needed to finance UN SDGs a year.
In designing the framework, RCBC engaged global third-party advisers ING Bank and Sustainalytics, a leading independent ESG research and ratings provider. Its framework also adheres to global definitions issued by the International Capital Market Association (ICMA) Green and Social Bond Principles, as well as the Asean Green and Sustainability Bond Standards. “We follow a rigorous process in identifying green and social assets eligible for funding,” said Armi Lamberte, head of Sustainable Finance and first vice president of RCBC.