RCBC ramps up sustainable financing in Philippines

Rizal Commercial Banking Corp. (RCBC) continues to lessen its exposure to coal-fired power plants as it ramps up sustainable financing in support of the banking sector's move toward building a climate-resilient and low-carbon portfolio.

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.

The phaseout of its exposure to coal is aligned with RCBC president and CEO Eugene Acevedo's pronouncement in December 2020 to cease funding for the construction of new coal power plants in the Philippines.

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.

The commitment has been documented as RCBC's coal policy statement within the bank's Environmental and Social Management System (ESMS) policy.

RCBC's Sustainable Finance Framework articulates its strategy to prioritize fund raising and lending to priority sectors that have clear environment and social benefits, foremost of which is clean energy.

The framework prescribes an exclusionary criteria, which identify certain projects as ineligible for the use of proceeds from the sustainable financing instruments, in particular fossil fuel power generation.

Since the implementation of the framework in 2019, RCBC has raised around $1.4 billion in green and sustainability bonds.

In February last year, RCBC 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 the 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 six percent share of coal exposure.

Its eligible sustainable portfolio, consisting of 8,000 projects, has also overtaken the total exposure to environmentally critical projects (ECPs) per the guidelines of the Department of Environment and Natural Resources (DENR) Environmental Management Bureau (EMB).

The DENR-EMB criteria for identifying ECPs are adopted under RCBC's ESMS policy as projects with elevated environment and social risks and labeled as environmental risk category (ERC) A or high risk accounts.

RCBC's ERC A projects comprised only 10 percent of its total loan portfolio in end-2022, compared to the 12 percent share of the sustainable portfolio.

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 targeting to increase its renewable energy portfolio by 10 to 15 percent per annum in the next 12 to 24 months.

Earlier, Acevedo told The STAR that the bank aims to finance more renewable energy projects this year as it continues to heed the call of the Bangko Sentral ng Pilipinas to be enablers of environmentally and socially responsible business decisions.