TWENTIETH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
of tljr sS'f ii'ctarp
25 AUG 27 A9:14
SENATE
S. No. 1S49
RECEIVED BY;
Introduced by Senator Loren 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 environmental 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 bill seeks to establish an environmental unit in 
public and private lending institutions that will guarantee that any loans or related 
funding applications are in compliance with environmental laws.
The environmental unit in every lending institution shall (1) assess if any loan 
or funding application has complied with the Environmental Impact Statement System 
under Presidential Decree No. 1586 as well as look at external cumulative impacts not


considered in the project EIA; (2) monitor continuous compliance of projects and 
collaterals conform to environmental laws; and (3) prepare an environmental 
assessment report for all projects and loans with environmental impact.
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.
'^i^OREN LEGARDA


TWENTIETH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
^’(©fficp of ti)p %ec-ct:nj
25 MIG 27 A9-.U
SENATE
s. No. 1249
received BY;,
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 Representatives of the Philippines in 
Congress assembled:
1 
Section. 1. Short Title. - This Act shall be known as the "Environmental Unit in
2 
Every Banking Institution Act."
3 
Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to
4 
strike a balance between socioeconomic development and environmental protection.
5 
In this regard, lending institutions are encouraged to adopt a corporate environmental
6 
policy to support environmental protection and sustainable development and to
7 
mitigate credit risks arising from the adverse impact of loans and other projects for
8 
financing in the environment. Pursuant to this policy, loan evaluation, approval, and
9 
release shall take into consideration the borrower's compliance with applicable
10 
environmental laws.
11 
Sec. 3. Creation of In-House Environmental Unit - There shall be created an
12 
in-house environmental unit in every lending institution tasked to ensure that any loan
13 
or related funding applications of any natural or juridical entity have complied with the
14 
Environmental Impact Statement System under Presidential Decree No. 1586, if
15 
applicable to the purpose intended for the loan application, and require a Risk
16 
Assessment to ensure that issues and projects external to the project to avoid
17 
cumulative and synergistic impacts that may lead to ecological or economic losses.
18 
Sec. 4. Functions of In-House Environmental Units in Lending Institutions:


1 
1. Compliance with Environmental Laws as the Basis for Approval of Loan
2 
Accounts. - Lending institutions shall ensure that projects subject to
3 
financing applications and collateral offered as security shall conform to
4 
environmental laws. Compliance of projects and collaterals with
5 
environmental laws shall be among the basis for approval of environmental
6 
units of loan accounts with environmental impact.
7 
2. Continuous Monitoring of Compliance. - Lending institutions shall encourage
8 
continuous compliance with environmental laws. Account officers (AOs)
9 
shall continue to monitor compliance with projects and collaterals until such
10 
time that the account is fully paid, or the collaterals are released or
11 
substituted. The AOs shall look into reported complaints against the client's
12 
projects/collateral.
13 
Borrowers covered under this law shall be required to submit copies of the
14 
periodic monitoring reports of their projects/collateral to the Department of
15 
Environment and Natural Resources (DENR) even after the account is fully
16 
paid or the collaterals are released or substituted to ensure continuous
17 
compliance with environmental laws.
18 
3. Environmental Assessment Report. - The environmental unit of every
19 
lending institution shall prepare an environmental assessment report for all
20 
projects and loans with environmental impact and assess overall portfolio
21 
cumulative impact. The report shall be integrated into the decision-making
22 
procedure of the bank's portfolio development and all project proposals
23 
and/or loan application.
24 
Sec. 5. Composition of Environmental Unit - The environmental unit shall be
25 
composed of three (3) functional units, wit:
26 
a) Environmental Review and Assessment Unit, which is tasked to ensure the
27 
environmental soundness of the project and the account's compliance with
28 
environmental laws, including matters external to the project but need to
29 
be considered to avoid environmental risks;
30 
b) Environmental Policy, Planning, and Systems Management Unit, which is
31 
tasked to develop/enhance the lending institution's internal policy to
32 
effectively implement the above corporate environmental policy; and


1 
c) Environmental Program Management Unit, which is tasked to
2 
develop/manage grant-assisted environmental programs and assist project
3 
management units in developing environment-related lending facilities that
4 
will provide services/support to the bank and its clients.
5 
Sec. 6. Non-Compliance of Borrowers. - The non-compliance of borrowers with
6 
appiicable environmental laws and with the submission of the periodic monitoring
7 
reports of their projects/coilateral to the DENR shali be considered a condition for
8 
default As such, the borrower must pay the full loan balance immediately, including
9 
the total interest amount, penalties, and other charges. Otherwise, the lender will
10 
begin the process of seizing collateral.
11 
Sec. 7. Separability Clause. - If any provision of this Act shall be held
12 
unconstitutional, the remainder of this Act not otherwise affected shall remain in full
13 
force and effect.
14 
Sec. 8. Repealing Clause. - All laws, executive orders, presidential decrees,
15 
rules, and regulations, or parts thereof inconsistent with any provisions of this Act are
16 
hereby repealed, amended, or modified accordingly.
17 
Sec. 9. Effectivity. - This Act shall take effect fifteen (15) days after its
18 
publication in the Official Gazette or in a newspaper of general circulation.
Approved,