The potential impact of climate patterns such as La Nina and El Nino episodes and natural disasters are used by the BSP in quantifying the potential impact of adverse weather conditions on the agriculture sector and in turn, inflation trends. On financial stability, the BSP knows the potentially significant impact of climate change and other environmental-related risks to the financial system.
In particular, this may affect the credit and operational risk exposures of banks that would, in turn, translate into profitability and solvency concerns. We also recognize that the BSP has a role to play in the process. In line with this, we have rolled out a two-pronged approach in promoting environmental, social and governance (ESG) principles.