The Bangko Sentral ng Pilipinas (BSP) has put forward guidelines for banks’ integration of sustainability principles in their investment activities.
According to Business World, under the proposed rules, the central bank recommended strategies to help banks assess the sustainability of their prospective investments.
Among these methods is integration, or for banks to explicitly include environmental and social risks in their investment analysis for better risk management and improving returns.
Under the screening strategy, banks may actively avoid investing in securities that belong to firms they believe ‘counter moral values, or standards and norms’. This means not investing in companies that are part of gambling or military weapons industries or entities that do not respect environmental protection and human rights.
BSP said, “These guidelines are being issued to set expectations on the prudent conduct of investment activities and the minimum practices that a BSP-supervised financial institutions should establish for the management and control of risks associated with investments.”
The BSP will also enable control mechanisms to help FIs prevent falling into the ‘greenwashing’ trap during the investment process. Under the new guidelines, a bank’s board of directors is responsible for ensuring that sustainability principles are integrated into their investment activities.
Stakeholders are being given until June 1 to give their feedback on the circular.
Copyright © 2022 RegTech Analyst
Copyright © 2018 RegTech Analyst