Green Infrastructure Investment Opportunities PHILIPPINES 2020 REPORT

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Green Infrastructure Investment Opportunities PHILIPPINES 2020 REPORT Green Infrastructure Investment Opportunities PHILIPPINES 2020 REPORT Supported by the ASEAN Catalytic Green Finance Facility, the Asian Development Bank and the Securities and Exchange Commission Philippines Philippines GIIO Report Climate Bonds Initiative 1 This report highlights green infrastructure investment Table of contents opportunities in the Philippines 3 SEC Foreword This report has been prepared to help tanks – in partnership with the Securities 4 ADB Foreword meet the growing demand for green and Exchange Commission (SEC) of the investment opportunities in the Philippines Philippines and the Asian Development 5 Green infrastructure: an and to support the country’s transition to a Bank (ADB). We would like to thank these opportunity for growth low carbon economy. partners along with the other organisations 6 • Snapshot: Macroeconomic outlook that contributed to the report: The Philippines It aims to facilitate greater engagement 7 • Snapshot: Infrastructure spending Department of Finance, the Public-Private on this topic between project owners and 9 • Snapshot: Climate policy Partnership Center of the Philippines; developers, and institutional investors. National Economic and Development 10 Green finance trends and Green infrastructure and corresponding Authority (NEDA), Development Bank of the opportunities green finance instruments are explored Philippines, BDO Unibank, Rizal Commercial in the report, with sector-by-sector 10 • Global demand for green is growing Banking Corporation (RCBC), Thomas Lloyd investment options presented. 11 • Green finance is growing in the Group, AC Energy, and BioPower Group. Philippines The report is intended for a wide range CBI also acknowledges the contributions made 12 • Snapshot: The Philippines Green of stakeholders, including domestic from members of the ADB Southeast Asia Bond Market investors, offshore pension funds and Innovation Hub and ASEAN Catalytic Green 20 • Brown to green transition in the asset managers, potential issuers, Finance Facility (ACGF) teams, including Philippines infrastructure owners and developers, as Joven Balbosa, Advisor, ADB Southeast well as relevant government ministries. 24 Green infrastructure investment Asia Department; Anouj Mehta, Unit Head, opportunities In developing this report, the Climate Green and Innovative Finance and the ACGF; Bonds Initiative (CBI) consulted with key Camille Bautista-Laguda (consultant, ACGF); 25 • Renewable energy Government bodies, industry, the financial Lianne De La Paz (consultant, ACGF), and 28 • Low carbon transport sector, peak bodies, NGOs and think Marina López Andrich (consultant ACGF). 31 • Sustainable water management 35 • Sustainable waste management 38 • Other green opportunities Green Infrastructure Investment the latest being the GIIO Vietnam report, Opportunities (GIIO) Report Series launched in April 2020. Future GIIO reports 39 Measures for growing green will include further exploration of opportunities infrastructure Green infrastructure presents a huge in Asia-Pacific as well as in Latin America.1 investment opportunity globally, with an 40 Annexes estimated USD100tn worth of climate 40 • Annex I: Green debt instruments compatible infrastructure required from now Green Infrastructure Investment Opportunities 43 • Annex II: Green equity instruments to 2030, in order to meet Paris Agreement VIETNAM 2019 REPORT 44 • Annex III: Credit enhancement emissions reduction targets. However, there mechanisms remains a lack of identifiable, investment- 46 • Annex IV: Risk transfer ready and bankable projects. There is also a instruments lack of understanding of what types of assets 47 • Annex V: Green standards and projects qualify for green financing. applicable in the Philippines In response to this challenge, CBI is Supported by European Climate Foundation 49 • Annex VI: Sample Green Pipeline developing a series of reports that aim to 54 Endnotes identify and demonstrate green infrastructure Green Infrastructure Green Infrastructure investment opportunities around the world. Investment Opportunities Investment Opportunities AUSTRALIA 2019 INDONESIA By so doing, it aims to raise awareness of UPDATE REPORT what is green and where to invest, as well as Exchange Rate September 30, 2020 to promote green bond issuance as a tool to finance green infrastructure. 1 USD = 48.48 PHP The report series commenced with the 1 PHP = 0.0206 USD GIIO Indonesia report, launched in May 2018, followed by five other reports – Sponsors Supported by European Climate Foundation Climate Bonds Initiative mission is to help drive down the cost of capital bond standard and certification scheme. CBI for large-scale climate and infrastructure screens green finance instruments against The Climate Bonds Initiative is an projects and to support governments seeking its Climate Bonds Taxonomy to determine international investor-focused not-for- increased access to capital markets to meet alignment and uses sector specific criteria profit organisation working to mobilise climate and greenhouse gas (GHG) emission for certification. the USD100tn bond market for climate reduction goals. change solutions. A simplified version of the Climate Bonds CBI carries out market analysis, policy research, Taxonomy is on page 59. More information on It promotes investment in projects and market development; advises governments the Climate Bonds Standard and Certification assets needed for a rapid transition to a low and regulators; and administers a global green Scheme can be found on page 21. carbon and climate resilient economy. The 2 Philippines GIIO Report Climate Bonds Initiative SEC Foreword As an archipelago in South East Asia situated on both the While green finance is relatively new in the Philippines, the first “Typhoon Belt” and “Pacific Ring of Fire,” the Philippines has long movers in our market have been instrumental in introducing the been exposed to environmental challenges. In fact, the country is concept to our domestic investor base and making other local firms considered among the most vulnerable to the effects of climate aware of the potential for green finance. Importantly, most Philippine change – the nation’s 100+ million people which are spread across green and sustainability bonds (roughly US$2.99 billion worth) have more than 7,000 islands, regularly face powerful – and increasingly carried the ASEAN Green or Sustainability label, with all ASEAN more frequent – typhoons, earthquakes and volcanic eruptions. labeled bonds also carrying second party opinions from noted In more recent years, the country also had to deal with rising sea providers, such as Sustainalytics and Vigeo-Eiris. However, it should levels, and periods of droughts and floods caused by the “El Nino” be noted that one transaction which did not carry the ASEAN label and “La Nina” weather phenomena. – as it was issued prior to the implementation of the ASEAN GBS – was the very first labeled green bond issuance in the Philippines: Armed with first-hand experience in dealing with the overwhelming a nearly US$300 million geothermal transaction in 2016 that was impact of climate change on the economy, Philippine authorities CBI certified. On that note, we thank CBI for playing a critical role in worked toward establishing a supportive enabling environment jumpstarting our green market. for the development of a sustainable financial market. Among the measures taken by the Philippine Securities and Exchange The continued development of the green and sustainability bond Commission (SEC), in conjunction with fellow ASEAN regulators, markets is also supported by the Philippines’ “whole of government” was the adoption of the ASEAN Green Bond Standards (GBS), approach to sustainable/ green finance. Recently, the Department ASEAN Social Bond Standards (SBS) and the ASEAN Sustainability of Finance established the Interagency Task Force on Green Finance Bond Standards (SUS). which consists of different government agencies to work toward developing a Philippine Sustainable Finance Roadmap. The SEC also These ASEAN Standards were developed by the ASEAN Capital instituted sustainability reporting for all listed corporations, and is Markets Forum (ACMF) and were intentionally aligned with the a staunch supporter of the principles of the Task Force on Climate- International Capital Market Association’s Green, Social and related Financial Disclosures (TCFD). The Bangko Sentral ng Pilipinas Sustainability Bond Principles, as well as the Climate Bond Initiative’s (BSP), recently published its sustainability framework for banks; (CBI) criteria. The ASEAN Standards were intended to provide clear joined the Network of Central Banks and Supervisors for Greening guidance for issuers as well as a measure of assurance to investors the Financial System (NGFS); and invested in $350 million of green that bonds carrying the ASEAN Green and Sustainability labels bonds for its own portfolio.2 The BSP also recently proposed the adhere to international best practice. Notably, the ASEAN GBS goes inclusion of green projects under an existing regulation that requires a step further than the ICMA Green Bond Principles by expressly banks to lend to targeted sectors.3 Most recently, President Duterte prohibiting fossil fuel power generation-related projects. signed the Energy Efficiency and Conservation Act of 2019 that calls Since the adoption of the ASEAN Standards, we have seen the rapid for 46,000 MW of energy savings by 2040. growth of the Philippine green bond market led mainly by the private
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