To advance climate-resilient, sustainable cities in the Philippines, the Organization for Economic Cooperation and Development (OECD) is urging the government to put in place an integrated and centralized framework that would attract green private investments.
“The Philippines faces several challenges in sustainable urban development financing. One major issue is the fragmented institutional coordination that hinders the implementation of sustainable urban development frameworks,” the OECD said in an April 17 report titled “Financing Sustainable Cities in Southeast Asia.”
“Despite progress in renewing national spatial plans and frameworks, the lack of integrated climate action and land use regulations remains a significant barrier,” the OECD added.
The OECD also identified challenges in diversifying financing instruments and leveraging private investment for sustainable cities in the country, including “complex” taxation and policy requirements for real estate investment trusts (REITs), which it nonetheless noted are being addressed by reforms introduced in 2020 through revisions in the REIT Act, allowing corporations and investors to promote more REIT investments.
“However, the new act simultaneously raised a constraint, requiring all REITs to reinvest any proceeds from the sale of shares or other securities issued in exchange for income-generating real estate, in the Philippines… While this requirement encourages local developers to found and manage REITs in the Filipino market, it stands as an obstacle to multinational REITs, who tend to make (re)investments in more than real estate markets,” the OECD noted.
Amid these challenges, the OECD is pushing for green financing instruments and opportunities being presented by the deep pockets of the country’s tycoons through public-private partnerships (PPPs).
In particular, the OECD stressed the role of the PPP Center in enabling privately financed programs and projects for local government units (LGUs).
“The Philippines’ PPP framework overview also highlights the need for better funding coordination across LGUs. An encompassing body for funds could help facilitate and allocate the necessary funds among LGUs for PPP projects that involve more than one LGU,” according to the OECD.
Across Southeast Asia, rapid urbanization—with 90 million people expected to move to the region’s bustling cities by 2030—place immense pressure on infrastructure and making cities more vulnerable to climate risks, the OECD report pointed out.
As the region’s urban areas face environmental threats like flooding, high emissions, and extreme heat, stronger climate adaptation and resilience investments are needed, the OECD said.
However, the OECD lamented that traditional funding models are insufficient, as LGUs are constrained by limited fiscal power and heavy reliance on foreign investments.
“Local governments’ spending responsibility as a share of total government spending remains limited in Malaysia (7.2 percent), the Philippines (11.1 percent), and Thailand (30.5 percent)—all below the OECD average (39.5 percent)—indicating a stronger reliance on national governments,” it said.
To address these challenges, the OECD urged improving public finance systems, expanding domestic capital markets, and leveraging diverse financial tools like green bonds and REITs.
For the OECD, strengthening urban planning, legal frameworks, and cross-government coordination is also crucial to attract private investments and align development with long-term sustainability goals.