Sustainable Fitch rates DBP’s sustainability bond framework as ‘good’

THE SUSTAINABILITY arm of Fitch Ratings has assessed the sustainability bond framework of the Development Bank of the Philippines (DBP) as “good” as it aligns with key international standards.

In a second-party opinion, Sustainable Fitch said transactions under the framework are aligned with the International Capital Market Association’s (ICMA) Green Bond Principles, Social Bond Principles, and Sustainability Bond Guidelines; the Green Loan Principles and Social Loan Principles of the Loan Market Association, Loan Syndications and Trading Association, and Asia-Pacific Loan Market Association; and the ASEAN Capital Markets Forum’s (ACMF) ASEAN Green, Social and Sustainability Bond Standards.

“Our overall assessment is that the framework’s alignment with these principles is ‘Good,’” it said.

“Our assessment entails an evaluation of the alignment of the framework’s commitments against all core components of the relevant principles. This includes the environmental and social benefits of the eligible projects intended for the UoP (use of proceeds), the processes of project selection and evaluation, the management of proceeds and reporting practices.”

Under DBP’s sustainability bond framework, proceeds may be allocated to projects across seven green categories and five social categories outlined by the ICMA.

“We expect the eligible projects to support DBP’s sustainability policies and aims,” Sustainable Fitch said.

For green financing, the bank may use bond proceeds for projects across renewable energy, energy efficiency, green buildings, clean transportation, pollution prevention and control, sustainable water and wastewater management, and climate change adaptation.

“The eligible green projects describe projects that have clear environmental benefits, such as GHG emissions reduction, sustainable use of water resources, waste and pollution management, and climate resilience,” it said.

For social financing, proceeds may be used for projects related to affordable basic infrastructure, access to essential services, affordable housing, food security, employment generation, and socioeconomic advancement and empowerment.

“The social UoP categories describe projects with clear social benefits, supporting relevant UN Sustainable Development Goals. The projects mainly target the general public,” Sustainable Fitch said.

“The framework sets out a clearly defined list of excluded activities. DBP has confirmed that issuances under the framework will also be subject to exclusionary criteria aligned with the requirements of the ACMF…, which excludes the financing of activities related to fossil fuels, alcohol, gambling, tobacco, and weaponry.”

It added that DBP’s framework has a clearly defined evaluation and selection process involving members with relevant skillsets in treasury and sustainability.

DBP is the premier government-run development financing institution and mainly provides loans focusing on four major areas: infrastructure and logistics; social services; micro, small and medium enterprises; and the environment.

Its net income rose by 26.09% year on year to P2.03 billion in the first quarter. — Aaron Michael C. Sy