SEC Commissioner Kelvin Lester Lee discusses the future of FinTech and Sustainable Finance as part of TALAB

As part of the Talakayang Alay sa Bayan (TALAB) 2023, Ateneo de Manila University's John Gokongwei School of Management hosted a TALAB session with Securities and Exchange Commission (SEC) Commissioner Kelvin Lester K Lee.

In his presentation, Commissioner Lee discussed the state of financial technology (FinTech) and sustainable finance (SusFin) in the Philippines and the role that the SEC has to play in this.

Commissioner Lee noted that the outlook on fintech was still quite positive in the country, with companies continuing to set up new fintech startups.

That said, this has posed a challenge to the SEC, which needs to balance the push for continued innovation with the need for regulation to protect Filipinos from any malicious scams posing as legitimate apps.

"Regulators have the difficult task of fighting fires before they are lit – foresee possible risks even before they happen while making room for innovation,” he stated in his presentation.

As part of this, he brought up the topic of cryptocurrencies, noting that their legality varies from one country to another. For example, while the USA, UK and Canada have allowed them, China has not.

For the Philippines, Commissioner Lee notes that the rule is that only those who are registered with the SEC are allowed. At the same time, the SEC also looks out for any possible scams and malicious actors. One example of this was the Forsage, which was revealed to be a $340 million Ponzi scheme. Commissioner Lee noted that the SEC had flagged Forsage well before its US counterpart did.

Another issue Commissioner Lee noted that the SEC was actively looking into was that of apps engaged in unfair lending practices. The threat posed by such apps resulted in the current SEC moratorium against the establishment of new online lending platforms.

On sustainable finance, Commissioner Lee noted that the sector was an important one for the region. While the ASEAN+3 Macroeconomic Research Office (AMRO) Estimates that Southeast Asia will experience economic growth of 4.9% for 2023 and 5.2% in 2024, a separate International Monetary Fund study found that it's also very vulnerable to climate change.

According to the Asian Development Bank (ADB) and the International Renewable Energy Agency, the region needs around US$210 billion in infrastructure investment by 2030 and US$290 billion in renewable energy investment by 2025. Of this, US$17 billion and US$13 billion respectively are needed by the Philippines.

With this in mind, Commissioner Lee then listed a number of the initiatives happening in the country. These included two case studies, the first of which was that of ACEN, an energy firm under the Ayala Group.

Commissioner Lee noted how ACEN recently divested its 246 MW SLTEC coal plant using the world’s first market-based Energy Transition Mechanism (ETM). The latter concept, which is being promoted by the ADB, leverages public and private investments to retire coal power assets on an earlier schedule than if they remained with their current owners.

For the SLTEC plant, the ETM transaction entailed its early retirement and transition to a clean technology by 2040, cutting its potential 50-year operating life by half. Meanwhile, 100% of the net proceeds from the divestment of the plant will be used by ACEN for renewables.

The second case study presented by Commissioner Lee was of the ASA Philippines Gender Bonds. 

Upon referral by the SEC, the ADB provided technical assistance to support ASA Philippines bond framework development and capacity building through the Asian Bonds Market Initiative. Proceeds from the sale of ASA Philippines Gender Bonds will be exclusively used to boost lending to women entrepreneurs, and women-led microenterprises in the Philippines.

In addition to the case studies, Commissioner Lee also gave updates on the latest sustainable finance developments in the region and in the country. This included the official launch of Blue Bonds in the country, as per SEC Memorandum Circular No. 15, series of 2023, or the Guidelines on Eligible Blue Projects and Activities for the Issuance of Blue Bonds in the Philippines.

"Blue Bonds" are similar to traditional bonds save for the fact that the entities issuing will use the proceeds generated – or a large proportion thereof – to protect and conserve marine ecosystems.

Commissioner Lee ended his talk by underscoring the potential that the Philippines had. He pointed out that the country had a resilient economy, with 6.4% GDP growth in Q1 2023 (exceeding its peers in the region), a vibrant digital economy 28.68 billion in US$ Digital Transactions, a tech-savvy population with 84.9% smartphone penetration as of 2022, on top of supportive government regulations as spearheaded by agencies like the SEC.

Following Commissioner Lee's presentation, Mr Karl Vendell M Satinitigan, Lecturer from JGSOM's Finance and Accounting Department provided the reactor's response, thanking the commissioner for his presentation. This then led into the lively open forum where students were able to ask questions and discuss some of the topics presented with the group.