Accounting Alerts

Guidelines on the Philippine Sustainable Finance Taxonomy

This Accounting Alert is issued to circulate Bangko Sentral ng Pilipinas (BSP) Circular No. 1187 dated February 21, 2024, and Securities and Exchange Commission (SEC) Memorandum Circular No. 5-2024 dated February 23, 2024, which both discuss the "Philippine Sustainable Finance Taxonomy Guidelines (SFTG)".

Section 1: Applicability

SFTG is designed in accordance with the Philippine Sustainable Finance Guiding Principles, aimed at promoting sustainable finance within the nation. The SFTG will function as a framework for determining the environmental and social sustainability of economic activities, providing stakeholders with guidance to make well-informed investment and financing choices.

Section 2: Assessment

The following steps outline the process for determining if an economic activity qualifies as environmentally or socially sustainable, and whether its financing can be categorized as aligned with the SFTG:

  1. Determine that the activity to be financed is not included in the enumeration of “Excluded Activity” under the SFTG and is compliant with Philippine laws.
  2. Select the relevant Environmental Objective (EO) of the activity.
  3. Assess whether the activity significantly harms the other EO.
  4. If there is harm, verify that the same has been remediated or will be remediated within the required defined period.

The SFTG provides a set of guiding questions and decision trees to support the regulated entities’ assessment. In addition, entities undertaking the economic activity should comply, at a minimum, with the Philippine social safeguard requirements.

After the assessment process, economic activities may be classified as Green, Amber or Red, following the definitions under the SFTG.  An activity that falls under the Red classification does not imply that the activity is unsustainable. Rather, the subject activity does not meet the higher sustainability ambition of the SFTG or pass the Do No Significant Harm (DNSH) or minimum social safeguards tests. The activity classified as Red may still be eligible for "unlabeled" financing.

The details of the Philippine SFTG are provided in the Annex 1 of the Memorandum Circular.

Section 3: Compliance

Regulated entities are directed to deepen understanding and familiarity with the SFTG and are encouraged to take into consideration its provisions and prescribed standards.

Please see attached circulars for further information.