Residents of Barangay Roxas District in Quezon City wade through floodwaters caused by continuous heavy rains brought by the southwest monsoon, locally known as habagat, on Tuesday, July 22, 2025. (Santi San Juan/MANILA BULLETIN)
By Manila Bulletin Newsroom
Published Jun 30, 2026 06:08 pm
Philippine firms face mounting pressure to adapt to worsening climate risks as recurrent flooding erodes productivity, threatens jobs, and drives businesses to relocate, prompting the World Bank to call for faster investments in resilient infrastructure, energy efficiency, as well as renewable energy (RE) adoption.
In a working paper titled “Climate Change, Firms and Energy Efficiency,” published last Monday, June 29, the Washington-based multilateral lender said climate change is affecting the private sector through both the direct impact of increasingly frequent weather events and the growing pressure to comply with international environmental standards, making climate resilience as well as energy efficiency critical to sustaining business growth.
The report said firms in major economic hubs such as Metro Manila and Cebu province are increasingly exposed to recurrent floods, with inadequate infrastructure worsening their vulnerability as well as raising the cost of adaptation.
It further noted that climate change is also influencing firms’ investment decisions as businesses respond to changing consumer preferences as well as stricter domestic and international environmental regulations by improving energy efficiency as well as reducing energy intensity.
The World Bank warned that recurrent climate events affect provinces accounting for 42 percent of Philippine jobs, with informal workers bearing the brunt of the impact. The lender said upgrading infrastructure is critical to protecting livelihoods and maintaining economic stability.
The report found that each additional day of heavy rain relative to a location’s long-term trend cuts firms’ productivity by one percent, encouraging businesses to relocate to less flood-prone areas.
“Extreme weather risk influences the location choices of firms in the Philippines,” the World Bank said, noting that companies increasingly favor drier areas while moving away from locations with greater precipitation risks.
About six percent of firms relocated annually between 2012 and 2018, with the highest movement recorded in Metro Manila, Central Visayas, and Calabarzon regions, according to the report.
The World Bank said that local government units (LGUs) have a key role in strengthening flood defenses to help retain investments in high-risk areas.
It also found that climate adaptation remains uneven across businesses, with large firms generally better prepared than smaller enterprises.
Only nine percent of small firms use flood early warning systems, compared with 12 to 14 percent among medium-sized and large companies, while just 39 percent of small firms carry insurance against extreme weather damage versus 51 percent of medium firms and 62 percent of large firms.
According to the report, better access to information, supplier diversification, and financing could help firms better prepare for recurring floods by reducing disruptions to operations as well as lowering adaptation costs.
The World Bank also urged the government to prioritize investments in drainage systems as well as flood-retention infrastructure, particularly in major business centers such as Metro Manila and Cebu, while streamlining construction permits in climate-vulnerable municipalities to speed up climate-resilient investments.
Beyond adaptation, the report said improving energy efficiency has become increasingly important as the country seeks to decouple economic growth from rising greenhouse gas (GHG) emissions.
Between 2012 and 2021, aggregate energy intensity in Philippine manufacturing declined by 37 percent, equivalent to an average annual reduction of 4.1 percent, driven by productivity improvements, greater efficiency within firms, and a shift toward less energy-intensive sectors.
The report also found that high electricity costs push firms to improve energy efficiency, especially in energy-intensive sectors, to curb consumption. It said carbon pricing could help firms adopt energy-saving technologies and shift to cleaner energy sources.
However, the World Bank said emissions continue to increase alongside economic growth, underscoring the need for faster RE investments.
The report added that foreign-owned firms as well as exporters are 17 percent and 26 percent more energy-efficient, respectively, than domestically owned or domestic-oriented firms, particularly those serving markets with stricter environmental standards.
It said lowering trade and investment costs, alongside expanding financing for exporters, could help more firms comply with international standards while boosting productivity.
The World Bank also noted that the Energy Efficiency and Conservation (EEC) Act requires energy audits for large energy consumers but provides limited incentives for small and medium enterprises (SMEs), calling for expanded support as well as awareness campaigns to encourage wider adoption of energy-efficient technologies.
The report likewise warned that provisions under the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act allowing enhanced deductions for energy costs could unintentionally discourage efficiency improvements if left unconditional.
Instead, it recommended linking the enhanced tax deductions to documented investments in energy efficiency or RE adoption, alongside launching a certification program recognizing energy-efficient firms and expanding simplified energy audits for SMEs.
“These improvements can maximize the effectiveness of the existing energy efficiency policies in the Philippines, promoting more inclusive growth and contributing to the country’s environmental goals,” the World Bank said.
