SEC drafts guidelines for ASEAN green bonds

THE SECURITIES and Exchange Commission (SEC) will be issuing guidelines for the issuance of ASEAN (Association of Southeast Asian Nations) Green Bonds in the country for the purpose of funding green and sustainable projects.

In a draft memorandum posted on its website for public comment, the SEC said it is coming up with the guidelines following the need to identify green finance standards to ensure sustainable growth in the ASEAN region.

The ASEAN Capital Markets Forum (ACMF) describes ASEAN Green Bonds as bonds and sukuk (Islamic bonds) that comply with the ASEAN Green Bond Principles. These principles pertain to voluntary process guidelines issued by the International Capital Market Association.

The proceeds of ASEAN Green Bonds shall be “exclusively applied to finance or refinance, in part or in full, new and/ or existing eligible Green projects,” according to an ACMF report.

Eligible green projects are those that address key areas of environmental concerns, providing clear environmental benefits which will be assessed and quantified by the issuer.

Section 8 of the preliminary guidelines lists down the following as eligible green projects: 1. renewable energy; 2. energy efficiency; 3. pollution prevention and control;

4. environmentally sustainable management of living natural resources and land use;

5. terrestrial and aquatic biodiversity conservation; 6. clean transportation; 7. sustainable water and waste water management; 8. climate change adaptation; 9. eco-efficient and/or circular economy adapted, production technologies and processes; and

10. green buildings which meet regional, national, or internationally recognized standards or certifications.

Fossil fuel power generation projects are excluded from the list of eligible green projects.

Meanwhile, issuers who are eligible to apply for green bonds must be a member of the ASEAN countries. A non-ASEAN issuer may also issue such securities as long as the eligible green project is located in any of the ASEAN member-countries.

Following the issuance of the green bonds, issuers must provide regular reports to their investors regarding the net proceeds of the funds. Under Section 17, issuers are recommended to give qualitative performance indicators and quantitative performance measures.

Quantitative performance measures include a project’s energy capacity, electricity generation, greenhouse gas emissions reduced or avoided, the number of people provided with access to clean power, the decrease in water use, reduction in the number of cars required, or other such reasonable performance measures.

The process for project evaluation and the use of proceeds shall be disclosed on a website designated by the issuer, as per Section 15 of the draft guidelines.

Should the capital raised be used for refinancing, Section 20 states that issuers must provide an estimate of the share of financing and refinancing. They must also clarify which investments or project portfolios may be refinanced, as well as state the expected look-back period for refinanced green projects to the extent that is relevant.

The SEC’s Markets and Securities Regulation Department is accepting comments for the draft rules until May 21. The rules will supplement the requirements under Sections 8 and 12 of the Securities Regulation Code, which details rules on the issuance of securities. —