Published May 25, 2021, 5:19 PM
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said they are about to issue “second-phase regulation” to make the banking sector more responsive to risks in transitioning to a low-carbon economy including climate change scenarios.
“Banks may gradually consider the future implications of ‘stranded asset risk’ in their credit portfolio,” said Diokno in a recent Investment Forum on Energy Transition.
The International Monetary Fund (IMF), in an April 2020 report, has expressed concern that with climactic trends, financial systems could be underprepared to cope with transition risk from policy, technology, legal, and market changes as they move to a low-carbon economy. These transition risks include “assets becoming stranded” as well as reputational damage, and the fear is that banks could be left with stranded assets due to climate change.