SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
S.B.No. 691 
'13 JUl -9 1\9 :44 
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Introduced by Senator LOREN LEGARDA 
EXPLANATORY NOTE 
Under the 1987 Philippine Constitution, it is the policy of the State to 
protect and advance the right of the people to a balanced and healthful ecology 
in accord with the rhythm and harmony of nature. It is in this sense that the State 
should strike a balance between economic development and environmental 
protection. 
While current environmental laws provide mechanisms to support the 
State in endeavouring the said balance, the problems and violations of the same 
surface after the projects or ventures have already been undertaken. 
In 1996, Executive Order No. 291 was promulgated to facilitate the 
attainment and maintenance of a rational and orderly balance between socio-
economic growth and environmental protection. It mandated the establishment 
of in-house environmental units in all implementing government agencies to 
ensure compliance of projects with existing standards provided in environmental 
laws. The EO, which covers government financial institutions (GFIs), was 
intended to ensure that loan or related funding applications of government and 
private institutions have complied with the Environmental Impact System. 
As the Asian Development Bank (ADB) has asserted in its study in 
corporate responsibility for environmental performance, "though governments 
must continue to playa central role in maintaining environmental quality, it is 
also clear that this traditional focus does not attempt to work directly with the 
most active financier and player in the development equation-the private 
sector. While governments determine the rules under which businesses act, the 
firms themselves use natural resources, make products, and generate pollution. 
Thus, a sustainable future for the region is not possible without the active 
engagement of the private sector" (ADB 2005). 
In light of the rising corporate social responsibility, especially in the area 
of environmental protection, financial institutions are now adopting the concept 
of corporate environmental policy that is grounded on sustainable development. 
Further, the risk of default as a result of environmental upgrading or costs for 
works incurred by the borrower and other costs related to environmental risks 
are aspects that financial institutions consider. 
Such are the foundations of this bill, which seeks to instate an 
environmental unit in lending institutions that will ensure that any loan or 
related funding applications are in compliance with environment laws. 


Moreover, monitoring of the project's compliance is continuous until such time 
when the account is fully paid or the collaterals are released or substituted. 
The environmental unit shall be composed of three functional units: 
1. Environmental Review and Assessment Unit· tasked to ensure the 
environmental soundness of the project and the account's compliance with 
environmental laws, thereby avoiding environmental risks; 
2. Environmental Policy, Planning and Systems Management Unit tasked to 
develop / enhance the lending institutions internal policy to effectively 
implement the above corporate environmental policy; and 
3. Environmental Program Management Unit tasked to develop/ manage grant-
I 
assisted environmental programs and assist project management units in 
developing environment-related lending facilities that will provide services/ 
support to the bank and its clients. 
This proposed ·measure shall complement the current environmental laws 
and shall contribute to their sound implementation through the proposed 
mechanism in place at the initial stage of the project - that is, before it is 
actualized through funds. The enactment of this measure will help facilitate 
sustainable development and likewise encourage sound business management. 
In view of the foregoing, the passage of this bill is earnestly sought. 


SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
S.B:No. 691 
Introduced by Senator LOREN LEGARDA 
AN ACT 
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ESTABLISHING 
ENVIRONMENTAL 
UNITS 
IN 
EVERY 
BANKING 
INSTITUTION TO ASSESS THE ENVIRONMENTAL COMPONENT OF LOAN 
APPLICATIONS 
Be it enacted by the Senate and House oj Representative oj the Philippines In 
Congress assembled: 
1 
SECTION 1. Declaration of Policy. - It is hereby declared the policy of the 
2 
State to strike a balance between economic development and environmental 
3 
protection. In this regard, lending institutions are encouraged to adopt a corporate 
4 
environmental policy to support environmental protection and sustainable 
I 
5 
d'evelopment and to mitigate credit risks arising from adverse impact of loans and 
6 
other projects for financing in the environment. Pursuant to this policy, loan 
7 
evaluation, approval and release shall take into consideration the borrower's 
8 
compliance with applicable environmental laws. 
9 
10 
SEC. 2. There shall be created an in-house environmental unit in every 
II 
lending institution tasked to ensure that any loan or related funding applications of 
12 
any natural or juridical entity have complied with the Environmental Impact 
13 
Statement System under Presidential Decree No. 1586. 
14 
IS 
SEC. 3. Lending institutions shall ensure that projects subject of financing 
16 
applications and collateral offered as security shall conform to environmental laws. 
17 
Compliance of projects and collaterals with environmental laws shall be among the 
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basis for approval of environmental units of loan accounts with environmental 
19 
impact. 
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21 
SEC. 4. Lending institutions shall encourage continuous compliance with 
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environmental laws. Account officers (AOs) shall continue to monitor compliance of 
I 


1 
projects and collaterals until such time that the account is fully paid or the collaterals 
2 
are released or substituted. The AOs shall look into reported complaints against 
3 
client's projects/collateral. 
4 
5 
Clients shall be required to submit copies of the periodic monitoring reports 
6 
of the Department of Environment and Natural Resources of their projects/ 
7 
collateral. 
8 
9 
SEC. 5. The environmental unit of every lending institution shall prepare an 
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environmental assessment report for all projects and loans with environmental 
11 
impact. The report shall be integrated into the project proposal and/ or loan 
12 
application. 
13 
14 
SEC. 6. The environmental unit shall be composed of three (3) functional 
15 
units, to wit: 
16 
17 
a) Environmental Review and Assessment Unit tasked, which is tasked to 
18 
ensure the environmental soundness of the project and the account's 
19 
compliance with environmental laws, thereby avoiding environmental risks; 
20 
b) Environmental Policy, Planning and Systems Management Unit, which is 
21 
tasked to develop/ enhance the lending institutions internal policy to 
22 
effectively implement the above corporate environmental policy; and 
23 
c) Environmental 
Program 
Management 
Unit, 
which 
is 
tasked 
to 
24 
develop / manage grant-assisted environmental programs and assist project 
25 
management units in developing environment-related lending facilities that 
26 
will provide services/ support to the bank and its clients. 
27 
28 
SEC. 7. The non-compliance of borrowers with applicable environmental 
29 
laws shall be considered a condition for default. 
30 
31 
SEC. 8. Separability Clause. - If any provision or part hereof is held invalid or 
32 
unconstitutional, the provisions not otherwise affected thereby shall remain valid 
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and subsisting. 
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35 
SEC. 9. Effectivity Clause. -This Actshall take effect fifteen (15) days after its 
36 
publication in at least two (2) newspapers of general circulation. 
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Approved,