The Philippines’ central bank is giving local lenders more room to finance climate-friendly projects. The Bangko Sentral ng Pilipinas has approved an extension of incentives that allow banks to exceed standard lending limits when funding eligible sustainable investments.
The move is aimed at keeping money flowing into sectors seen as critical to the country’s long-term resilience and energy transition.
A regulatory push to unlock more green capital
The Bangko Sentral ng Pilipinas said its Monetary Board has agreed to extend a regulatory incentive first introduced in 2023.
Under the policy, banks may exceed the single borrower’s limit by up to an additional 15%, provided the excess exposure is directed toward qualified green or sustainable projects.
Normally, Philippine banks are capped at lending up to 25% of their net worth to a single borrower. The incentive allows that ceiling to rise, but only for financing tied to environmental and sustainability objectives.
The extension takes effect from January 6, 2026, and will remain in place for another two years.
Why the single borrower limit matters
The single borrower’s limit, or SBL, is designed to protect banks from concentrating too much risk in one client or group.
Relaxing it, even partially, is not a small decision.
By allowing banks to go beyond the cap for specific projects, the central bank is signaling that green investments deserve special treatment because of their long-term economic and social benefits.
For large renewable or infrastructure projects that require significant upfront capital, the existing limits can be a constraint. The BSP’s move effectively removes that bottleneck, at least for sustainability-linked deals.
Sectors targeted by the incentive
The central bank said the policy is meant to support continued financing for sectors that are central to the Philippines’ climate and development goals.
These include:
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Renewable energy projects such as solar, wind, and hydro
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Water supply and wastewater treatment systems
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Clean and low-emission transportation
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Climate-resilient infrastructure designed to withstand extreme weather
Officials believe extending the incentive period will help banks plan longer-term pipelines and support projects that might otherwise struggle to secure sufficient funding.
Banks gain flexibility, not a free pass
While the policy gives lenders more headroom, it does not remove oversight.
Loans still need to meet eligibility criteria for sustainable finance, and banks remain subject to prudential standards, reporting requirements, and risk management rules.
In practical terms, the incentive is meant to nudge banks toward prioritizing green projects when deciding how to allocate their balance sheets, rather than encouraging reckless lending.
One banking executive described it as “flexibility with guardrails.”
Part of a broader sustainability agenda
The BSP has been steadily weaving sustainability into financial regulation over the past few years.
It has issued guidelines on environmental and social risk management, encouraged climate stress testing, and pushed banks to integrate sustainability into corporate governance.
Extending the green lending incentive fits into that trajectory.
Officials say the additional two-year window gives the financial system time to deepen expertise in evaluating and structuring sustainable finance deals, especially as global standards continue to evolve.
What happens next
In addition to extending the SBL incentive, the BSP said it is reviewing other possible measures to further support sustainable finance, though it did not provide details.
Market participants expect those reviews to focus on risk-weighting, disclosure requirements, and alignment with international green taxonomy frameworks.
For now, banks have clearer regulatory backing to expand lending for large-scale green projects, at a time when demand for climate-related investment is growing.
A signal to the market
The extension sends a message beyond the banking sector.
For project developers, it signals that regulators are willing to adjust long-standing rules to accommodate sustainability goals. For investors, it reinforces the idea that green projects will continue to receive policy support.
And for the broader economy, it reflects a view that climate-related investment is no longer peripheral, but a core part of financial and development planning.
As the Philippines faces rising climate risks and infrastructure needs, the central bank’s decision positions the financial system as an active partner in addressing them.
