‘Fintech tools can be used for data for green financing’

THE financial technology (fintech) sector can leverage its tools to collect climate-related data in line with the country’s initiative of promoting sustainable financing, a fintech group said.

FintechAlliance.ph Chairman Angelito M. Villanueva told the BusinessMirror that the fintech industry can help in coming up with the valuation of climate-related risks for green financing.

“We can play a big role in the collection of data as climate-related data are not available,” he said. “We need to properly quantify the cost of climate-related risk.”

Villanueva said the industry group has been doing its part to achieve sustainable financing through the recommendation of the Asian Development Bank, which focuses on blockchain, climate financing and innovations in financial instruments.

At the same time, FintechAlliance.ph noted that it has been collaborating with the Bangko Sentral ng Pilipinas (BSP) and the financial institutions in adopting green financing.

“We provide the technology in achieving the goals of sustainable financing,” Villanueva added. “The development of digital financial technology reduces paper transactions; and this would also greatly reduce the impact on the environment.”

He said that sustainable financing can help the economy recover from the challenges posed by climate change and natural calamities.

“The problem of climate change cannot be ignored as seen in the massive flooding we experienced last month and the previous years,” the FintechAlliance.ph chief stressed.

“Cash flows are affected as people try to recover from their misery. That’s why the green financing framework is necessary and important to mitigate the risk that our broken environment would cause us,” Villanueva added.

Earlier this year, the BSP issued the guidelines on sustainable finance framework, which require the local banks and financial institutions to integrate environmental, social and governance (ESG) and sustainability principles into their corporate strategy, risk management and bank operations.

The banks are given three years to meet all the requirements in the provisions.

Climate-related data

Sabine Mauderer, a member of the Deutsche Bundesbank’s executive board, said in a recent online forum that climate-related data are not readily available, which means corresponding risks are not usually priced in “adequately.”

This is where fintech players step in, she said, noting they can facilitate collection of necessary and relevant data, thanks to innovative solutions.

Mauderer said digital technologies such as artificial intelligence, big data and blockchain allow comprehensive and cost-efficient data gathering.

Apart from data collection, the bank official said fintech firms can also contribute in analyzing the climate-related data.

“Investors and banks can use such data in their analysis modeling and evaluation of climate-related risk and opportunity where they can team up with fintechs offering specialized services in this field,” she said.

Green bonds

The analysis will then eventually lead to the development of green financial products, Mauderer said. An example of this is the issuance of green bonds, she cited, which can be made more efficient and credible with the aid of digital technology such as blockchain.

She said that using blockchain “could smooth the complex issuance of green bonds, saving costs and time for issues.”

“This could really open up the green bond market to wider investor base, including retail investors,” Mauderer added.

This month, two financial intermediaries pioneered the blockchain-enabled bond issuance in the country. The digital solution was aimed at providing retail investors a secure and direct access to bonds.

The dual-tranche transaction raised P9 billion at the end of offer period. The bond offering, which has an original issue size of P3 billion, includes 3-year and 5.25-year securities with interest rates of 2.75 percent and 3.375 percent, respectively.

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