SEVENTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
Second Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Maximo B. Rodriguez, Jr.

7605

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 goverment agencies to ensure
compliance of projects with existing standards provided in environmental laws. It
covers government financial institutions (GFis) 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.

MAXIMO B. RODRIGUEZ, JR.


SEVENTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES )
Second Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Maximo B. Rodriguez, Jr.

7605

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 internal policy to effectively implement the
above corporate environmental policy; and

©) 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,