NINETEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHIUPPINES ) 
First Regular Session 
)
SENATE
s. No. 2134
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23 MAY -4 P6:34
RHCEIVcO BV
Introduced by Senator Loren B. Legarda
AN ACT
ESTABLISHING ENVIRONMENTAL UNITS IN EVERY BANKING 
INSTITUTION TO ASSESS THE ENVIRONMENTAL COMPONENT OF LOAN
APPLICATIONS
EXPLANATORY NOTE
The Asian Development Bank Institute (ADBI) reports that a growing number 
of financial and monetary authorities across Asia started to consider how to integrate 
climate and environmental considerations into their policy frameworks or were 
encouraged to adopt environmental and social risk management (ESRM) practices.
Recognizing that enviromnental hazards and climate change could pose 
significant threats to the safety and soundness of individual financial institutions and 
the entire financial system, the Bangko Sentral ng Pilipinas issued a Sustainable 
Finance Framework, Environmental and Social Risk Management (ESRM) 
Framework, and the Guidelines on the Integration of Sustainability Principles in 
Investment Activities of Banks. These issuances encourage effective risk mitigation 
and management arising from climate change and environmental hazards as well as 
promote financing to green or sustainable projects.
To bolster the role of financial institutions in promoting sustainable financing 
and protecting the environment, this biU seeks to establish an environmental unit in 
public and private lending institutions that will guarantee that any loans or related 
funding applications are in compHance with environmental laws.
The environmental unit in every 
or funding application has complied 
System imder Presidential Decree No. 
impacts not considered in the project 
projects and collaterals conform to 
environmental assessment report for 
impact.
lending institution shall (1) assess if any loan 
with the Environmental Impact Statement 
1586 as well as look at external cumulative 
EIA; (2) monitor continuous compliance of 
environmental laws; and (3) prepare an 
aU projects and loans with environmental


The current environmental laws shall be supplemented by this proposed 
policy, helping to ensure that the laws are better implemented. The enactment of this 
measure will help facilitate sustainable corporate governance and sound business 
management.
In view of the foregoing, the urgent passage of this bill is sought
LOREN LEG ARDA


NINETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
)
SENATE
s.No. 2134
ggEuait
of lllf ! ft.ifP
• V K i
23 MAY-4 P6 34
RECEIVED BV.
Introduced by Senator Loren B. Legarda
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AN ACT
ESTABLISHING ENVIRONMENTAL UNITS IN EVERY BANKING 
INSTITUTION TO ASSESS THE ENVIRONMENTAL COMPONENT OF LOAN
APPLICATIONS
Be it enacted hy the Senate and House of Representatives of the Philippines in Congress 
assembled:
Section. 1. Short Title. - This Act shall be known as the "Environmental Unit in 
Every Banking Institution Act."
Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to strike 
a balance between socioeconomic development and environmental protection. In this 
regard, lending institutions are encouraged to adopt a corporate environmental policy 
to support environmental protection and sustainable development and to mitigate 
credit risks arising from the adverse impact of loans and other projects for financing 
in the environment. Pursuant to this poHcy, loan evaluation, approval, and release 
shall take into consideration the borrower's compliance with applicable 
environmental laws.
Sec. 3. Creation of In-House Environmental Unit. - There shall be created an in- 
house environmental imit in every lending institution tasked to ensure that any loan 
or related funding applications of any natural or juridical entity have complied with 
the Environmental Impact Statement System imder Presidential Decree No. 1586, if 
applicable to the purpose intended for the loan apphcation, and require a Risk 
Assessment to ensure that issues and projects external to the project to avoid 
cumulative and synergistic impacts that may lead to ecological or economic losses.


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Sec. 4. Functions of In-House Environmental Units in Lending Institutions:
1. Compliance with Environmental Laws as the Basis for Approval of Loan Accounts. 
- Lending institutions shall ensure that projects subject to financing 
apphcations and collateral offered as security shall conform to 
environmental laws. Comphance of projects and collaterals with 
environmental laws shall be among the basis for approval of environmental 
units of loan accounts with environmental impact.
2. Continuous Monitoring of Compliance. - Lending institutions shall encourage 
continuous compUance with environmental laws. Account officers (AOs) 
shall continue to monitor comphance with projects and collaterals until 
such time that the account is fully paid, or the collaterals are released or 
substituted. The AOs shall look into reported complaints against the client's 
projects/ collateral.
Borrowers covered under this law shall be required to submit copies of the 
periodic monitoring reports of their projects/coUateral to the Department 
of Environment and Natural Resources (DENR) even after the account is 
fuUy paid or the collaterals are released or substituted to ensure continuous 
comphance with environmental laws.
3. Environmental Assessment Report. - The environmental unit of every lending 
institution shah prepare an environmental assessment report for ah projects 
and loans with environmental impact and assess overall portfolio 
cumulative impact. The report shall be integrated into the decision-making 
procedure of the bank's portfolio development and all project proposals 
and/or loan apphcation.
Sec. 5. Composition of Environmental Unit. - The environmental unit shall be 
composed of three (3) functional units, wit
a) Environmental Review and Assessment Unit, which is tasked to ensure the 
environmental sotmdness of the project and the account's comphance with 
environmental laws, including matters external to the project but need to be 
considered to avoid environmental risks;


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b) Environmental Policy, Planning, and Systems Management Unit, which is 
tasked to develop/enhance the lending institution's internal policy to 
effectively implement the above corporate environmental policy; and
c) Environmental Program Management Unit, which is tasked to 
develop/manage grant-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.
Sec. 6. Non-Compliance of Borrowers. - The non-compliance of borrowers with 
applicable environmental laws and with the submission of the periodic monitoring 
reports of their projects/collateral to the DENR shall be considered a condition for 
default. As such, the borrower must pay the full loan balance immediately, including 
the total interest amount, penalties, and other charges. Otherwise, the lender will 
begin the process of seizing collateral.
Sec. 7. Separability Clause. - If any provision of this Act shall be held 
unconstitutional, the remainder of this Act not otherwise affected shall remain in full 
force and effect.
Sec. 8. Repealing Clause. - All laws, executive orders, presidential decrees, rules, 
and regulations, or parts thereof inconsistent with any provisions of this Act are 
hereby repealed, amended, or modified accordingly.
Sec. 9. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette or in a newspaper of general circulation.
Approved,