PHILIPPINES - The Bangko Sentral ng Pilipinas (BSP) has rolled out a draft regulation which will make sustainable housing more enticing for banks and customers alike, cutting the credit risk weighting of loans forclimate‑resilient homes from 50 percent to a mere 20 percent.
The draft circular that is currently open for feedback by industry stakeholders up to April 17, 2026, is designed to encourage the banks to lend more to environmentally sustainable housing projects. The risk weight reduction implies that a lower percentage of the bank’s own capital will be held as security for the loans. Thus, it decreases the interest rates on the loans issued for such properties creating a financial incentive for lenders to support green housing.
Why the shift matters
The BSP cited the Philippines’ high exposure to climate‑related hazards such as flooding, typhoons, and extreme heat. Households and residential assets are increasingly vulnerable, making climate resilience at the community and household level a national priority. The central bank noted that the domestic market for sustainable housing loans remains “nascent” and limited, even as demand for such housing grows. Targeted regulatory measures, it said, are needed to accelerate market development.
What qualifies for the lower risk weight
To be eligible for the 20 percent risk weight, a loan must meet several conditions:
-It must be secured by a first mortgage.
-The property must be owner‑occupied.
-The property must incorporate specific green or climate‑resilient features.
From the draft circular, it is clear that there are different types of resilience interventions that are considered as eligible. They include increasing the floor level to be above the anticipated flood level, setting up of flood defenses, improving the drainage system to ensure proper flow of water, as well as putting up cool roofs that will make the roof able to sustain itself in times of extreme weather. Other measures like on-site energy and rainwater harvest facilities have also been mentioned. These features are meant to reduce a property’s exposure or vulnerability to physical climate risks.
Aligning with national climate commitments
The BSP has stated that the intention behind differentiating the capital treatment is to increase the provision of loans for climate resilient housing, support individual-level climate adaptation efforts, and help the Philippines achieve its Nationally Determined Contributions as set out by the Paris agreement. It has committed itself to reducing the country’s emissions by 2.71 percent without conditions and by 72.29 percent conditionally by 2030.
Once adopted, the new policy is expected to provide banks with the regulatory clarity needed to design and market sustainable housing loan products more effectively. For homebuyers, this could translate into more affordable financing options for properties built or retrofitted to withstand the impacts of a changing climate.
