EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez

3828

House Bill No.
EXPLANATORY NOTE

The Constitution states that 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. In 1996, Executive Order No. 291 was issued 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. It covers government financial institutions (GFls)
and was intended to ensure that loan or related funding applications of government and
private institutions have complied with the Environmental Impact System.

The Asian Development Bank (ADB) has asserted in its study in corporate
responsibility for environmental performance that though governments must continue to play
a 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. 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.

Hence, 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.

In view of the foregoing, early passage of this bill is eamestly sought

Tit

RUFUS B. ROD! EZ


EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez _
3829

House Bill No.

AN ACT
ESTABLISHING ENVIRONMENTAL UNITS IN EVERY LENDING 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:

SECTION 1. Declaration of Policy. - It is hereby declared the policy of the State to
strike a balance between economic 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 adverse impact of loans and other projects for financing in the environment.
Pursuant to this policy, loan evaluation, approval and release shall take into consideration
the borrower's compliance with applicable environmental laws.

SEC. 2. There shall be created an in-house environmental unit 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 under
Presidential Decree No. 1586,

SEC. 3. Lending institutions shall ensure that projects subject of financing
applications and collateral offered as security shall conform with environmental laws.
Compliance of projects and collaterals with environmental laws shall be among the basis for
approval of environmental units of loan accounts with environmental impact

SEC. 4. Lending institutions shall encourage continuous compliance with
environmental laws. Account officers (AOs) shall continue to monitor compliance of 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 client's projects/collateral

Clients shall be required to submit copies of the periodic monitoring reports of the
Department of Environment and Natural Resources of their projects/ collateral

SEC. 5. The environmental unit of every lending institution shall prepare an
environmental assessment report for all projects and loans with environmental impact. The
report shall be integrated into the project proposal and/or loan application.

SEC. 6. The environmental unit shall be composed of three functional units, to wit

a) 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;

b) Environmental Policy, Planning and Systems Management Unit tasked to develop/
enhance the lending institutions intemal policy to effectively implement the above corporate
environmental policy; and

c) 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.

SEC. 7. The non-compliance of borrowers with applicable environmental laws shall
be considered a condition for default.

SEC. 8. Separability Clause. - If any provision or part hereof is held invalid or
unconstitutional, the remainder of the law or the provision not otherwise affected shall
remain valid and subsisting

SEC. 9. Effectivity Clause. -This Act shall take effect fifteen (15) days after its
publication in at least two (2) newspapers of general circulation

Approved,