Rizal Commercial Banking Corp. (RCBC) is ramping up its sustainable financing efforts to support the Bangko Sentral ng Pilipinas (BSP)’s reported plan to consider lending for ‘green projects’ as compliance with the Agri-Agra Law even as it continues to lessen its exposure to coal-fired power plants.
The Yuchengco-led bank’s loan exposure to the sector decreased by 6.7 percent to P39.2 billion in 2022 from P42 billion in 2021, as it targets to continually taper this off to zero by 2031.
RCBC president and CEO Eugene Acevedo (IMAGE CREDIT: Macky Lim)
The phaseout of its exposure to coal coincides with an announcement by RCBC president and CEO Eugene Acevedo in December 2020, wherein he said that RCBC would cease funding for the construction of new coal power plants in the Philippines.
“No more coal, no more coal. I’ll say that slowly: no more coal!” Acevedo has said then. “For RCBC, we have committed to help promote a low-carbon economy, develop services that respond to the needs of the unbanked and underbanked, and build a resilient balance sheet.”
Coal-fired power plants, which account for approximately 58 percent of the country’s energy mix, are the largest source of environmentally-harmful greenhouse gas (GHG) emissions.
RCBC as an early adopter of sustainable and inclusive banking practices
In a recent presentation to the Bankers Association of the Philippines (BAP), Mr. Acevedo said that RCBC had been an early adopter of Philippine sustainable and inclusive banking practices, having started the implementation of an Environmental and Social Management System (ESMS) in 2011.
The ESMS enables RCBC to engage its customers, share best practices, and support clients that seek solutions to reduce their impact on the environment and communities.
The bank’s sustainable and inclusive banking practices are aligned with the objectives of BSP Circular No. 1085, which mandates lenders to include environmental and social considerations in all their governance frameworks, risk management systems, strategies, and operations.
RCBC also supports the BSP’s recent membership with the Network for Greening the Financial System (NGFS), which is expected to benefit the banking industry through best practices in other jurisdictions, particularly in the areas of risk management and stress testing exercises.
“The COVID-19 pandemic has strengthened our resolve in helping address urgent environmental and social needs such as renewable energy, clean transportation, and public health. These are needs that meet our sustainable finance framework,” Acevedo explained.
RCBC’s Sustainable Finance Framework
The bank’s “Sustainable Finance Framework” articulates its strategy to prioritize fund-raising and lending to priority sectors that have a clear social and environmental benefit, foremost of which is clean energy.
The framework prescribes exclusionary criteria, which identify certain projects as ineligible for the use of proceeds from sustainable financing instruments, such as fossil fuel power generation. RCBC has since raised around US$1.4 billion in green and sustainability bonds with the implementation of the framework in 2019.
In February last year, RCBC also launched the country’s first peso green time deposit in support of the bank’s green asset portfolio and in response to the unserved market keen on saving while promoting accountability on environmental awareness and protection.
The proceeds from both bond issuances and the green time deposit helped support RCBC’s sustainable asset growth. As of end-2022, the bank’s eligible sustainable assets continue to represent 12 percent of the total loan portfolio, significantly outpacing the 6% share of coal exposure.
This sustainable portfolio is substantially comprised of funding for green projects, with the estimated asset mix shifting to 71:29 in terms of the ratio between eligible green and social assets, versus the 60:40 mix in 2020, or prior to RCBC’s declaration to cease funding of the construction of new coal power plants in the Philippines.
The bank is now targeting to increase its renewable energy portfolio by 10 to 15 percent per annum in the next 12 to 24 months.