FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
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) 
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SENATE 
S.B. No.13 7 4 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
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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. 
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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-
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. 
~REN~DA--·· 
Senator 
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FIFTEENTH CONGRESS OF THE 
FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
) 
SENATE 
S.B.No. 1374 
Introduced by Senator Loren Legarda 
AN ACT 
ESTABLISHING 
ENVIRONMENTAL 
UNITS 
IN 
EVERY 
BANKING 
INSTITUTION TO ASSESS THE ENVIRONMENTAL COMPONENT OF LOAN 
APPLICATIONS 
Be it enacted by the Senate and House of Representative of the Philippines In 
Congress assembled: 
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SECTION 1. Declaration, of Policy. - It is hereby declared the policy of the 
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State to strike a balance between economic development and environmental 
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protection. In this regard, lending institutions are encouraged to adopt a corporate 
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environmental policy to support environmental protection and sustainable 
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development and to mitigate credit risks arising from adverse impact of loans and 
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other projects for financing in the environment. Pursuant to this policy, loan 
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evaluation, approval and release shall take into consideration the borrower's 
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compliance with applicable environmental laws. 
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SEC. 2. There shall be created an in-house environmental unit in every 
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lending institution tasked to ensure that any loan or related funding applications of 
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any natural or juridical entirj have complied with the Environmental Impact 
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Statement System under Presidential Decree No. 1586. 
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SEC. 3. Lending institutions shall ensure that projects subject of financing 
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applications and collateral offered as security shall conform to environmental laws. 
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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 
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impact. 
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SEC. 4. Lending institutions shall encourage continuous compliance with 
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environmental laws. Account officers (AOs) shall continue to monitor compliance of 
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projects and collaterals until such time that the account is fully paid or the collaterals 
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are released or substituted. The AOs shall look into reported complaints against 
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client's projects/ collateral. 
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Clients shall be required to submit copies of the periodic monitoring reports 
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of the Department of Environment and Natural Resources of their projects/ 
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collateral. 
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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 
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impact. The report shall be integrated into the project proposal and/ or loan 
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application. 
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SEC. 6. The environment~l unit shall be composed of three (3) functional 
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units, to wit: 
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a) Environmental Review and Assessment Unit tasked, which is tasked to 
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ensure the environmental soundness of the project and the account's 
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compliance with environmental laws, thereby avoiding environmental risks; 
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b) Environmental Policy, Planning and Systems Management Unit, which is 
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tasked to develop/ enhance the lending institutions internal policy to 
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effectively implement the above corporate environmental policy; and 
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c) Environmental 
Program 
Management 
Unit, 
which 
is 
tasked 
to 
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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. 
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SEC. 7. The non-compliance of borrowers with applicable environmental 
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laws shall be considered a condition for default. 
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SEC. 8. Separability Clause. - If any provision or part hereof is held invalid or 
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unconstitutional, the provisions not otherwise affected thereby shall remain valid 
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and subsisting. 
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SEC. 9. Effectivity Clause. -This Act shall take effect fifteen (15) days after its 
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publication in at least two (2) ne",,:"spapers of general circulation. 
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Approved, 
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