Despite moratorium, Philippine banks still financing fossil fuel projects: report
[MANILA] Banks in the Philippines continue to bankroll fossil fuel and coal projects mostly by issuing bonds, and they are doing so at an advanced rate that is detrimental to the country’s long-term climate targets.
These were among the key findings of a new coal divestment scorecard issued by Withdraw from Coal: End Fossil Fuels (WFC-EEF), a clean energy advocate group that is made up of a coalition of research and environment groups.
This scorecard ranked 15 Philippine banks according to their investment contributions to non-renewable energy projects. The “dirtiest” bank for the fourth straight year was the Ayala-led Bank of the Philippine Islands, followed by the largest lender BDO Unibank, which is now the top financier of fossil gas projects and investments in the country.
Making up the rest of the top five are Chinabank, Metrobank and Security Bank.
In all, the banks funded around US$930 million for the construction and expansion of new fossil gas projects from April 2022 to March this year. They also financed as much as US$867 million worth of projects related to coal over the same period. The majority of the approved bonds came up to US$594 million, with the remainder being loans.
“The remarkable shift from loans to bonds is what facilitates continued fossil fuel investments,” said Avril de Torres, the deputy executive director of the Center for Energy, Ecology and Development (CEED) think tank. CEED is part of the WFC-EFF coalition.
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“Banks must realise that every time they underwrite or facilitate a toxic bond, they have a direct hand in the worsening impacts of the climate crisis,” she added.
In 2020, the Philippines announced a moratorium on new coal projects. This has come in for much criticism since then, however, with de Torres noting that the past year’s financing trends expose the limitations of the moratorium as not all-encompassing.
In recent years, many banks have made strong commitments to divesting and pivoting towards renewable and sustainable energy sources, although it remains questionable if they can reach those targets.
In January, BDO announced that it had 15 biomass projects in its portfolio, a sign of its pledge for greener fuel sources.
“Biomass is a high potential renewable energy source for the Philippines given that 40 per cent of the population is engaged in agriculture and the country has an abundance of organic agricultural waste,” the company said then.
Security Bank has also gone on the record to say that it would stop funding new coal projects by 2033 to support the government’s promise to lower greenhouse gas emissions.
Outlining its recommendations, de Torres said that banks that have made public pronouncements for cleaner energy “should ensure that they do not finance these projects through loopholes in their own policies, such as through underwriting or selling securities”.
CEED estimates that the Philippines needs to abandon fossil gas projects by 2035 to meet the targets of the Paris Agreement and limit global warming to below 1.5 deg C.
“Financing climate action should not be seen as a competing priority. Rather, it should be treated as an indispensable part of economic growth and development,” Finance Secretary Benjamin Diokno said at a recent forum.
According to a report by the World Bank on the Philippines’ climate and development, inaction on the climate crises will incur substantial losses estimated at around 13 per cent of gross domestic product by around 2040.
However, Filomeno Sta Ana – the co-founder of Action for Economic Reforms, a policy research and advocacy group – feels that the government still has not done enough to significantly steer the investment climate away from fossil fuels.
“One can surmise that the government has not made clear what its priorities are in relation to renewable energy, which makes private sector players stick to old ways,” he told The Business Times.
De Torres, meanwhile, has urged banks to amplify their ambitions for cleaner energy sources. “We are seeing the reality of stranded assets; hopefully they can understand the urgency of divesting,” she added.
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