From vulnerability to resilience: financing climate transition in the Philippines 

The Philippines is no stranger to the realities of climate change. Each year, typhoons, rising seas, and heatwaves test the country’s infrastructure and resilience.   

For the third consecutive year in a row, the Philippines topped the World Risk Index—highlighting its extreme exposure to climate-related hazards and deep-rooted socioeconomic vulnerabilities. In the past few years alone, the country has endured 22 typhoons, including the Category 5 Super Typhoon Rolly, which was one of the strongest ever recorded.   

But amid this adversity lies a critical opportunity. Climate risk is now financial risk — and adaptation is the next frontier for sustainable finance. As the global economy shifts toward low-carbon, climate-resilient models, the financial sector holds the key to unlocking investment, enabling innovation, and helping vulnerable countries like the Philippines transition toward a more sustainable and secure future.  

For Philippine banks and insurers, climate risks manifest in two major ways: physical risks, such as extreme weather events that disrupt operations and damage assets; and transition risks, as policy shifts, market changes, and regulation impact carbon-intensive sectors.  

These risks may affect asset values, increase credit defaults, and introduce volatility into financial institutions' portfolios. When businesses are hit by climate-related shocks or fall behind in the energy transition, their ability to repay loans weakens — increasing default rates and putting bank balance sheets under pressure.  

In a market like the Philippines, where climate-resilient infrastructure is still developing and ESG data is often incomplete, these risks are harder to assess and price. This makes it even more important for financial institutions to build robust frameworks for climate risk evaluation, scenario analysis, and carry out forward-looking decision-making.  

Historically, climate finance has skewed heavily toward mitigation — funding projects that reduce carbon emissions. Adaptation and resilience, despite being equally essential, have lagged far behind. According to the Climate Bonds Initiative (CBI), only about 19% of green, social, and sustainability-linked bonds have made any reference to adaptation.  

This is beginning to change. In a landmark development, CBI — a global leader in mobilising capital for climate action — recently released an expansion of its Climate Bonds Taxonomy to formally recognise climate adaptation and resilience investments. Developed in collaboration with the UN Office for Disaster Risk Reduction, the taxonomy provides clear criteria for identifying investments that help communities and systems prepare for and withstand climate hazards.  

The taxonomy identifies four key investment types:  

• Adapting measures (e.g., flood defences or drought-resistant crops)  

• Adapted activities (assets designed to operate under future climate conditions)  

• Enabling measures (such as climate data infrastructure or early warning systems)  

• Enabling activities (broader systemic investments supporting resilience)  

Out of 1,444 adaptation investments identified, over 400 are deemed “automatically aligned” — including solutions such as automated water control systems and weather early-warning platforms. Others must meet thresholds to guard against maladaptation, where solutions designed to reduce risk in one area—such as building coastal barriers—can unintentionally worsen risks elsewhere by disrupting natural water flows.  

This development offers a significant breakthrough for adaptation finance: it gives investors, multilaterals, and regulators a clear, science-backed framework to confidently direct capital into projects that build climate resilience — not just reduce emissions.  

The growing focus on adaptation is also reflected locally. In May 2025, the Bangko Sentral ng Pilipinas (BSP), in partnership with the UN Environment Programme Finance Initiative, hosted a knowledge-sharing session on climate risk modelling—highlighting the role of adaptation finance in strengthening MSME resilience and aligning with broader financial sector stability.  

Despite the Philippines' vast renewable energy potential, scaling up green investments remains difficult. Policy uncertainty, financing gaps, and a lack of technical capacity stall many promising initiatives, particularly at the mid-sized project level.  

ING takes a holistic approach to sustainability that goes beyond climate risk mitigation to include additional considerations such as adaptation, biodiversity, and human rights. We assess how exposed clients are to physical climate risks, as well as how resilient their business models are in the face of those risks. Critically, we support clients with tailored financing that helps them future-proof operations — from the energy grid and agriculture to healthcare and infrastructure.  

At the heart of our climate strategy is Terra, our science-based approach to steering our loan portfolio toward net-zero by 2050. Since 2018, we’ve developed emissions-reduction pathways for key sectors and deepened our engagement with clients on their transition plans.  

In the past year we’ve taken significant steps to integrate climate considerations into every stage of decision making. These include review of commercial transactions for their impact on climate, nature and social factors, incorporating data-driven ESG risk assessments to support our clients prepare and deliver on their transition plans.  

These efforts blend sound commercial judgment with environmental accountability—ensuring that we don’t just finance the future, but actively shape it.  

In the Philippines, climate adaptation is not optional — it is essential. Yet only a small fraction of companies have developed robust strategies to manage these risks. The banking sector must step up to fill this gap.  

At ING Philippines, we combine global expertise with local insight to help businesses navigate the transition. Our sector specialists across energy, telecom, agriculture, food, and healthcare evaluate climate risk exposure, co-develop adaptation strategies, and structure sustainability-linked financing that rewards meaningful progress.  

For example, sustainability-linked loans (SLLs) align financial incentives with climate outcomes by linking interest rates to ESG performance — a powerful lever for change in a high-risk market.  

Globally, an estimated US$4 trillion per year is needed through 2030 to finance the transition to a net-zero economy. Much of that capital will have to come from private finance — and from banks that are willing to lead.  

As climate risk accelerates, financial institutions that embed adaptation into their strategy — not as an afterthought, but as a core focus — will be better positioned to serve clients, protect portfolios, and contribute meaningfully to societal resilience.  

At ING, we’re committed to being part of that solution. By embedding climate considerations into our risk frameworks, lending decisions, and client engagement, we aim to help businesses in the Philippines and across the region build a more sustainable future—one that can better withstand shocks, seize opportunity, and leave no one behind.  

Originally published in BusinessMirror