Philippines: IFC invests $150m in BDO bond to back climate change projects

Source: SM Investments

World Bank Group’s private investment arm International Finance Corp (IFC) is investing $150 million in a green bond issued by BDO Unibank Inc that will finance climate change projects in the Philippines.

This marks the first green bond issued by a commercial bank in the Philippines, and also the first type of investment made by IFC in a financial institution in East Asia and the Pacific.

BDO is the largest bank in the Philippines. IFC is the sole investor in the green bond meant to expand financing for private sector investments that help to address climate change.

BDO, in a press statement, explained the pioneering green bond will provide an alternative source of long-term green finance in the country and contribute to the Philippines’ target of reducing carbon emissions by 70 per cent by 2030 relative to its Business As Usual (BAU) scenario and conditioned on international support.

The funds will be used exclusively to finance climate-smart projects including renewable energy, green buildings, and energy-efficient equipment.

BDO noted the financing is expected to help save 93,000 tons C02 emissions per year by 2022.

BDO president and CEO Nestor V. Tan, said climate change has become a legitimate environmental issue in the country.

“Climate change is a very real concern in the Philippines. It is one of the most vulnerable countries globally to the impacts of such change,” Tan said.

He added this also aligns with the goal of growing BDO’s climate business, and ultimately, fostering the nascent climate finance market in the Philippines.

Meanwhile, IFC director for East Asia and the Pacific Vivek Pathak, said by building on their long-term partnership with BDO, the aim is to create a vibrant green bond market in the country and stimulate private sector investment in renewable energy and energy efficiency.

“By setting the standard and the benchmark for green bonds issued in accordance with the Green Bond Principles which IFC helped develop, we hope to pave the way for other issuers and investors to access financing through this product, at a time when demand for green infrastructure and other sustainable investments are high,” Pathak said.

The issuance is a culmination of an advisory engagement on sustainable energy finance between IFC and BDO that started in 2010. It helped establish sustainable energy finance as a core part of the bank’s sustainability strategy.

BDO reported it expanded its climate-smart portfolio from zero to over $500 million, which made it the country’s market leader in climate financing.

IFC is one of the world’s largest financiers of climate-smart projects for developing countries, according to BDO.

Since 2005, IFC has invested $18.3 billion in long-term financing from its own account, and mobilized another $11 billion through partnerships with investors for climate-related projects.

In all, IFC has issued $7.25 billion in green bonds in 12 currencies. These issuances are part of a global strategy to develop the green bond asset class in emerging markets.

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