The journey to responsible financing
BENEL D. LAGUA
“You cannot escape the responsibility of tomorrow by evading it today.”
-Abraham Lincoln
The Development Bank of the Philippines (DBP) institutionalized responsible finance practices into its business functions through the integration of environmental considerations into all aspects of its operations and services, asset management and business decisions.
It started in 1997 when an Environmental Policy Statement (EPS) was adopted.
The EPS stipulates the DBP’s commitment to environmental protection and sustainable development. It explicitly declares that DBP shall develop, implement and continually improve an Environmental Management System (EMS).
The bank endeavored to not just comply with relevant environmental laws. It aimed to encourage other institutions to pursue environmental protection through its lending and technical assistance programs, including environmental due diligence inquiry in risk assessment and management.
To report the bank’s environmental performance, DBP started publishing a Corporate Environmental Report in 1998 until 2007 and then shifted to publishing Sustainability Development Report starting 2008 to cover the triple bottom line reporting (environment, social and economic).
In 1999, DBP developed an Environmental Due Diligence Manual and Environmental Performance Monitoring (EPM) Manual. These manuals documented the procedures undertaken by the bank in exercising uncompromising due diligence in the evaluation of environmental risks in all projects supported as consistent with DBP’s EPS.
Moreover, the EPM is an innovative means of ensuring that projects comply with the required environmental permitting requirements and clearances, that mitigating measures are in place, and that targets have been met.
In 2002, the bank also achieved ISO 14001 Certification and has been a holder of such since then. Having established an EMS, the bank subscribes to Philippine environmental rules and regulations such as the Environmental Impact Statement System and adopts a policy requiring submission of an Environmental Compliance Certificate or Certificate of Non-Coverage for DBP funded projects.
The other milestones of the bank in 2016 and 2017 were the adoption of Social Safeguards Policy and the Credit Policy Guidelines on Project Evaluation to further the responsible finance principle in the bank.
The Social Policy Statement stipulates the DBP’s commitment to social protection and sustainable development. It also declares that DBP shall integrate and implement social consideration into all aspects of its operations and services, asset management and business decisions.
The bank also has taken into consideration the Sustainable Development Goals (SDG) that was launched in 2016 and adapted by 193 United Nations-member countries, including the Philippines. The SDGs is a set of 17 global goals and around eight of these goals are towards environmental sustainability.
It embodies universal aspirations that ultimately support the improvement of a person’s quality of life. DBP crafted 10 developmental financing programs and initiatives that are guided by the SDGs and these are promptly monitored. Aside from these projects, the People Survival Fund and Green Climate Fund are designed to mitigate climate change.
Because of these initiatives, other government agencies and award giving bodies did not fail to recognize the efforts of the bank. The National Economic Development Authority conferred its Good Practice Award in 2017 for institutionalizing environmental, social and climate change considerations in project evaluation and monitoring in the bank’s credit process. The purpose of this award is to encourage and recognize good practices of agencies implementing Official Development Assistance and locally funded programs/projects, so that other implementing agencies may learn and adopt them.
The Association of Development Financing Institutions in Asia and the Pacific or ADFIAP gave recognition to DBP-funded environmental projects in 2017 and 2018. The prestigious Karlsruhe Sustainable Finance Award also cited some of the bank’s funded project in 2016 and 2017. The Karlsruhe Sustainable Finance Awards is given by the City of Karlsruhe in Germany to honor financial institutions and organizations with significant contributions to the field of sustainable finance.
This journey has not been without its challenges. Admittedly, processes in lending became complicated, and not a few potential clients noted that the bank tended to be stricter than the environmental regulators themselves. Profitable lending opportunities had to be sacrificed. The bank had to undertake a streamlining exercise to ensure it was not too far behind competition in its turnaround time.
The process continues to be fine-tuned to this day.
As the UNEP-FI proclaims, to finance the future we want, we need to change finance and finance change. Changing finance means promoting the integration of sustainability issues into mainstream financial system and financial institution decision making. Financing change refers to mobilizing finance to make the economy more sustainable through the bank’s priority thrusts.
(Benel D. Lagua is Executive Vice President at the Development Bank of the Philippines. He is an active FINEX member and a long time advocate of risk-based lending for SMEs. The views expressed herein are his own and does not necessarily reflect the opinion of his office as well as FINEX.)
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