HSBC Philippines is expecting a pickup in sustainability bond issuance after the recent slowdown as a result of high interest rates.
In a webinar, the HSBC Philippines Corporate Sustainability Vice President Ceejay Hernandez informed that the pickup will be driven by the expected easing cycle of Bangko Sentral ng Pilipinas (BSP), together with the ongoing push for banks and companies to develop sustainability frameworks and increasing demand for this kind of financing among stakeholders.
He said, “Money is expensive right now, but coupled with the increasing demand, the increasing regulatory space in terms of sustainability, and also the increasing understanding and demand on the stakeholder, it (the sustainable bond market) continues to grow.”
Hernandez informed that sustainable financing was on the rise years ago but started slowing down after the Central Bank started its tightening cycle. “We’ve seen a considerable increase, especially in renewable energy or green financing. That spelled a boom, in a sense, of sustainable financing. However, the increase in interest rates affected that, because when we look at the 2024 numbers, we’ve seen a bit of slowdown in terms of investments in sustainability,” He said.
Hernandez added that the mandate issued by the BSP for lenders to adopt the Philippine Sustainable Finance Taxonomy Guidelines (SFTG) has also helped boost the issuance of sustainability bonds.
The SFGT guidelines work as a tool to classify whether the economic activity is socially or environmentally sustainable and serve as a guide for stakeholders in making financial decisions and investments. Banks have till the end of the year to comply with SFTG guidelines.
“For some of the banks, especially the smaller ones, it’s a bit of a challenge to set up a new framework. The idea of the BSP is really to work with these banks to set them up. And so, far as we’re seeing, a lot of banks, especially locally, have issued green bonds or blue bonds already because you cannot issue these bonds without sustainable finance frameworks,” Hernandez said.
