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Regulatory update
The Philippines is making significant progress in aligning its regulatory framework with global sustainability standards, as ESG factors gain importance worldwide. Key regulatory bodies, including the Securities and Exchange Commission (SEC), Bangko Sentral ng Pilipinas (BSP), Insurance Commission (IC), and the Department of Environment and Natural Resources (DENR) are leading the country's efforts in sustainability reporting.
These agencies are working together to create a strategy that focuses on sustainability reporting, innovative financing, and circular economy principles. Their goal is to build a more resilient economy that balances growth with environmental stewardship and social responsibility.
Sustainability reporting guidelines
The SEC has reaffirmed its commitment to sustainability reporting by continuing its enforcement of Memorandum Circular No. 4, Series of 2019, which mandates a ‘comply or explain’ approach for publicly listed companies. This approach allows flexibility for companies to either comply with the reporting requirements or explain their reasons for non-compliance. However, more robust guidelines are expected to be released in late 2024 or early 2025, which will introduce a sustainability report template in the form of a SuRe Form.
The updated reporting framework is set to align with global standards such as the GRI, IFRS S1 and S2, and the UN SDGs. Some of the key updates include:
- A narrative report with an executive summary highlighting the company's sustainability initiatives;
- The SuRe Form in Excel format, which will include comprehensive sustainability-related risks, opportunities, and industry-standard metrics, alongside company-specific data; and
- An encouragement for independent assurance of sustainability reports and a more detailed disclosure of Scope 3 GHG emissions (the indirect emissions that occur in a company's value chain).
Key developments and strategic direction
The SEC and BSP have already endorsed the adoption of IFRS S1 and S2 in the Philippine context. These standards will be introduced through the Financial and Sustainability Reporting Standards Council. A phased implementation is planned, with Tier 1 companies expected to adopt the standards starting in the fiscal year 2025, and full compliance expected by fiscal year 2027. This strategic move is designed to enhance transparency and accountability in the country’s corporate reporting practices, making it easier for investors and stakeholders to make informed decisions based on reliable sustainability data.
Broader ESG efforts and policy support
The updated guidelines will not only focus on environmental factors but will also emphasise social inclusion, governance, and corporate responsibility. The new framework reflects a shift towards a more holistic approach to ESG reporting, with a clear push for more accurate, transparent, and consistent disclosure practices that align with international standards.
This strategic move aims to enhance transparency and accountability, paving the way for better investment decisions and stakeholder engagement.
Key market insights:
BSP is leading efforts to integrate sustainable finance into the banking sector through its Sustainable Finance Framework (SFF). Under Circular No. 1085, banks are required to include environmental and social (E&S) risks in their annual disclosures. The BSP's framework provides a three-year transition period for banks to fully integrate these risks and introduces climate stress testing to assess banks' resilience to climate-related challenges.
Key trends emerging from these regulations include:
- Increased adoption of sustainable practices: Banks are expected to incorporate ESG standards into their operations in response to both regulatory pressures and growing awareness of climate risks.
- Enhanced risk management: Financial institutions will need robust environmental and social risk management (ESRM) systems to address the impacts of climate change.
- Green financing initiatives: There will be a noticeable rise in funding for green projects, demonstrating a commitment to environmental sustainability.
The BSP is also focused on building the capacity of financial institutions, through international networks and research on climate change implications, to support green lending and sustainable central banking practices. Additionally, the Philippine Sustainable Finance Taxonomy, developed through collaboration with the BSP, SEC, and IC aims to direct capital towards sustainability goals like reducing greenhouse gas emissions and enhancing climate resilience. This framework helps to ensure that capital is directed toward truly sustainable projects, minimising the risk of greenwashing.
In a further effort to promote environmental protection through a circular economy, Republic Act No. 11898 mandates large enterprises to implement policies for managing plastic waste. This act obliges companies with assets over ₱100m to recover up to 80% of their plastic packaging waste by 2028. Compliance requires annual verification by independent auditors, reinforcing accountability in environmental impact management.
The Philippines is charting a path toward a sustainable future, marked by comprehensive ESG regulations and an increasing focus on accountability and transparency. As companies and financial institutions adapt to these evolving standards, they not only contribute to global sustainability efforts but also enhance their competitiveness in an increasingly conscientious market. Stakeholders must stay informed and engaged with these developments, leveraging them to foster a resilient economy that prioritises sustainable growth.
Albert Pilot
"Effective ESG and climate reporting are not just compliance measures but essential tools for building trust and driving sustainable growth. In an era where stakeholders—from investors to consumers—demand greater accountability, transparent reporting is key to demonstrating a company's commitment to sustainability."
Daphne A. Jamotillo
