The Bangko Sentral ng Pilipinas (BSP) is ushering in mandatory ESG and climate reporting, with the first phase set to take effect in 2027. Through its draft circular, the BSP proposes the integration of globally aligned sustainability and climate related disclosure standards across the domestic banking sector.
By amending Section 153 of the Manual of Regulations for Banks (MORB), the central bank aims to harmonize disclosure requirements across the financial system. This initiative directly builds on the Securities and Exchange Commission’s (SEC) recent mandates, specifically adopting the Philippine Financial Reporting Standards (PFRS) S1 and S2, which closely track the rigorous international baselines set by the International Sustainability Standards Board (ISSB).
Addressing Financial System Vulnerabilities
According to the BSP, this policy acceleration is driven by necessity. Climate change is no longer just an environmental concern; it poses real, systemic risks to financial stability. At the same time, global and local stakeholders are demanding more reliable, transparent, and decision-useful information to assess a financial institution’s long-term resilience accurately.
A Tiered Approach To Compliance
To give financial institutions time to build capacity, the BSP is introducing a rigorous three-tier implementation schedule based on bank size and market capitalization:
- Tier 1 (Effective FY 206, 2027 Reporting): Publicly listed banks with a market capitalization exceeding Php 50 billion (as of December 31, 2025) will lead the transition, adopting the standards for fiscal years starting January 1, 2026.
- Tier 2 (2028 Reporting): Publicly listed banks with a market cap between Php 3 billion and Php 50 billion, alongside non-listed universal and commercial banks (UKBs) with capital above Php 50 billion.
- Tier 3 (2029 Reporting): Smaller listed banks, institutions listed only on the PDEx, and non-listed UKBs with capital under Php 50 billion.
- Tailored Relief for Smaller Lenders: Non-listed thrift, rural, cooperative, digital, and Islamic banks will not be required to adopt the full PFRS S1 and S2 disclosures immediately. Instead, they will follow simplified, modified disclosure guidelines under the MORB to protect them from excessive administrative burdens.
To ensure a smooth transition and allow institutions to build adequate internal data systems, the BSP has built-in compliance relief. During the first year of implementation, banks can limit disclosures to only climate-related risks and opportunities. Furthermore, the highly complex reporting of Scope 3 greenhouse gas emissions will be suspended across all tiers for the first two years.
This regulatory upgrade underscores the maturity of the Philippine financial sector, where capital will increasingly be steered toward enterprises that demonstrate environmental sustainability and social impact.
