40% of Chinese financing in PH tied up with at least 1 ESG risk: study

MANILA – About 40 percent of the Philippines’ development finance from China is associated with at least one type of ESG (economic, social, and governance) risk, results of a study show.

The findings were presented during a media briefing on Wednesday by US-based research firm AidData, which detailed China’s economic and diplomatic engagements in the Philippines for the past two decades.

‘The assessment we found is that 40 percent of the projects that China was bankrolling here in the Philippines had a heightened level of exposure to at least one form of risk – environmental, social or governance,’ AidData Director of Policy Analysis Samantha Custer said.

The study found that the energy sector appears to be one of the country’s ‘greatest vulnerabilities,’ as Beijing-financed projects in the Philippines have the ‘highest incidence of ESG risk overall’.

‘Although all three types of risk manifest, environmental risks are most frequently associated with these projects. The agriculture, forestry, and fishing
sector also had elevated ESG risk across the board,’ it added.

Custer said Beijing’s terms also tend to be ‘relatively opaque,’ which in turn creates fiduciary risks.

‘Because you are talking about large sums of money without a lot of transparency, it creates opportunities for collusion and corruption,’ she said.

The report showed that China bankrolled 233 projects valued at USD9.1 billion in the Philippines between 2000 and 2022, at least 91 percent of which were ‘high-interest loans’.

Roughly 55 percent of these relied on Chinese firms, ‘often state-owned enterprises’ that are associated with elevated exposure to ESG risk or are directly or indirectly sanctioned by the World Bank or Asian Development Bank.

While discouraging decoupling from China, Custer said the Philippines should be ‘smart about the terms’ of its economic dealing with the Asian power.

‘I would say it is not in the Philippines’ interest to entirely decouple dealing from China. I think your negotiation hand is stronger when you can ha
ve more people around the table, so you should be working with the US, you should be working with China, you should be working with Australia,’ she said.

‘The fewer people around the table, the more you’re kind of stuck taking whatever deal is before you. The smart play is probably the hedging one.” (PNA)

Source: Philippines News agency