Sustainability as a tool for financial decision-making for companies

By Jesus Lava III & Mariam Hazel Pugoy

As the year comes to an end, the company budgeting for the next year does too. For most organizations, while sustainability has its champions within the company, potential expenses associated with establishing and running corporate climate and sustainability programs often need justification.

Regulatory requirements and reputational risks are often the go-to rationales but impacts to financial performance should also be considered. A company’s continued inaction on sustainability can affect its fiscal outcomes in two ways: constrained access to financing and unmanaged sustainability and climate risks.

This perspective is increasingly reflected at the executive level: according to Deloitte’s 2025 C-Suite Sustainability Report, sustainability ranks as a top three priority for business leaders, with over 80 percent reporting increased sustainability investments over the past year.

Constrained access to financing

The Banko Sentral ng Pilipinas (BSP) issued Memorandum M-2022-042 or the Guidelines to Implement Environmental and Social Risk Management System, in 2022, which serves as the basis for integrating environmental and social risks in the banks’ operations.

Since its circulation, financial institutions have been rapidly integrating sustainability and climate considerations into their portfolio and risk management frameworks. Regulatory developments, particularly in the financial sector, increasingly require financial institutions to assess how their clients manage environmental and social risks to reduce their exposure to financial risks.

On a global scale, investors and asset managers are also integrating the environmental, social and governance (ESG) framework in their financing strategies. According to a survey conducted by Financial Analysts Journal for asset managers and investors, 63 percent of the respondents said that ESG information is material to investment performance and 33 percent of the respondents said that it is part of their investment product strategy.

This translates into a clear message for corporates that access to capital will increasingly depend on the ability to demonstrate credible climate and sustainability governance, risk management, and transition planning. Companies that cannot meet these expectations may face reduced access to capital in the coming years as financial institutions prioritize activities that support their sustainable financing targets and commitments.

Unmanaged sustainability and climate risks

Sustainability and climate risks are no longer abstract or long-term concerns. Physical risks, transition risks, regulatory changes, and market shifts already have measurable financial consequences ranging from asset impairments and operational disruptions to increased insurance costs and declining asset values.

Without knowing the exposure and without the plans and strategies to manage these risks, companies expose themselves to financial losses that are often far more significant than the cost of preventive action.

In Deloitte’s robust methodology for physical and transition climate risk assessment, financial impacts are quantified across a company’s value chain. On physical risks, there are quantifiable financial impact on operating costs, asset value, and unproductive revenue. In addition, there are quantifiable financial impact on the potential carbon tax liabilities, cost of stranded assets from high-carbon technologies, and cost of additional investments to transition to low-carbon technologies.

What can companies do?

As a first step, companies need to reframe sustainability as a financial issue and acknowledge its importance in long-term business resilience. This mindset allows companies to move beyond compliance and reporting, and toward value-protective decision-making. This is where the “how” becomes critical.

1. Align corporate and financial strategy with financial institutions’ expectations
   
   Companies need to recognize that requirements from financial institutions have evolved. These entities now assess whether a company’s long-term strategy is resilient to changing regulatory and market conditions. Aligning climate and sustainability plans with these expectations strengthens relationships with financial institutions and signals long-term viability.
   
   This alignment includes climate awareness from the board level, integration of sustainability into enterprise risk management, and science-based transition or adaptation strategies. Companies that demonstrate this alignment are better positioned during credit due diligence processes, capital-raising activities, and refinancing discussions.
   
   
2. Use assessments to drive action, not just disclosure
   
   In climate risk assessment engagements, insights at the operations and facilities level should be consistently incorporated. Ultimately, the assessment should go beyond producing outputs for reporting compliance. Climate risk assessments, in particular, should inform strategic planning and financial decision-making.
   
   A high-level qualitative assessment is a good starting point but may not be enough to drive meaningful insights. A well-designed assessment should answer a fundamental management question: Are the identified risks financially material enough to require action today?
   
   When the impacts are quantified, they provide a strong business case for investment, rather than an abstract sustainability argument. Sustainability assessments become decision-support tools that guide capital allocation, risk mitigation measures, and strategic adjustments.

Competitiveness through climate commitment

As Philippine companies finalize their plans and priorities for 2026, sustainability and climate should be evaluated with the same lens applied to compliance and risk management.

The cost of action is measurable and planned. However, the cost of inaction from constrained financing and unmanaged sustainability and climate risks is uncertain, potentially significantly larger, and often realized when companies are least prepared.

As the year ends, one message is increasingly clear: sustainability is no longer a cost center. It is an investment and a financial decision that shapes resilience, competitiveness, and access to capital in the Philippine market.

Jesus Ma. Lava III is the Sustainability and Emerging Assurance leader at Deloitte Philippines, a member firm of the Deloitte network. Mariam Hazel Pugoy-Wee is a manager with the Sustainability and Emerging Assurance practice of Deloitte Philippines.