Manila Is Doing Better in Promoting Green Finance. But What Does This Really Mean?

The Philippines seems to be on the right track in developing green projects, a new study confirms.

According to the Global Green Finance Index, the country placed 69th out of 96 financial centers worldwide in that regard, up from the 74th spot in the previous year. Manila’s rating, likewise, jumped 37 points—going from 536 to 573.

What do these numbers mean, and what is green finance, anyway?

Green finance is any structured financial activity—whether a product or service—created to ensure a better environmental outcome, according to the World Economic Forum.

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In more specific terms, it refers to the use of loans, debt mechanisms, or investments to encourage the development of green initiatives; minimize the impact on the climate of regular projects; or both.

This means that the Philippines’ higher rankings suggest that it’s doing better in adhering to more sustainable approaches to growth, particularly through the utilization of its funds.

But while that’s the case globally, Manila is still among the laggards in the region

Taking a closer look at the country’s performance, Manila, nevertheless, continues to lag behind its neighbors in the Asia-Pacific, the index showed.

It ranked 18th across the region, and 14th out of 15 financial centers in select cities in East and Southeast Asia. For comparison, Singapore placed the highest among all centers in the region, followed by Seoul, Sydney, and Shenzhen. 

Overall, London topped the index, while Geneva and Zurich took the second and third places. The Bahamas, Bahrain, and Nairobi occupied the last three spots.

“The centers which perform well in the GGFI continue to be places that are committed to environmental development across the economy [….] and building their skills for green finance for the future,” the report said.

The index utilized assessments from professionals in financial services and other sectors to look into the performance of all centers globally. It specifically included the depth to which green finance has penetrated their businesses, as well as the quality of their products and services. Among the considerations for the areas with the “greatest” impact were those with energy-efficient investments, disinvestment from fossil fuels, and green insurance.

How the Philippines is growing its green finance market

Just recently, the Bangko Sentral ng Pilipinas’ Monetary Board approved the adoption of sustainable finance taxonomy guidelines. 

These are used as a classification tool for micro, small, and medium enterprises, as well as large businesses, to determine whether an economic activity is environmentally and socially sustainable.

In December 2023, the Philippine central bank relaxed its lending rules to encourage green finance among banks. It approved the gradual reduction of the reserve requirement rate for green, social, sustainability, or sustainable bonds to zero from three percent.

These are only some of the steps the country has been taking to achieve its goals of having a "greener" economy. Of course, as other studies may point out, the Philippines may still need to be more “ambitious” in terms of decarbonizing and relying on more environment-friendly approaches in the long run.