SEC strengthens push for sustainable finance
The Securities and Exchange Commission (SEC) has reinforced its push for sustainable finance through the adoption of the country’s taxonomy guidelines.
The Philippine Sustainable Finance Taxonomy Guidelines (SFTG) provides a framework for the determination of the environmental and social sustainability of economic activities and guidance for stakeholders in making well-informed investment and financing choices.
It offers a simplified approach for the assessment of micro, small and medium enterprises’ activity for financing to ensure that they are not unduly excluded from participating in sustainable finance.
The SFTG was formulated under the guidance of the Financial Sector Forum composed of the SEC, Bangko Sentral ng Pilipinas, the Insurance Commission and the Philippine Deposit Insurance Corp.
Adopting the taxonomy guidelines on sustainable finance forms part of the SEC’s efforts to promote environmentally and socially sustainable economic activities.
“With the Philippine Sustainable Finance Taxonomy Guidelines in place, we hope to channel and amplify more capital toward economic projects that further sustainability goals such as lowering greenhouse gas emissions and bolstering climate resilience, while fostering transparency by reducing the likelihood of greenwashing,” SEC chairperson Emilio Aquino said.
The SEC said issuers of securities should refer to the Philippine SFTG when making investment decisions or designing sustainable financial products and services, among others.
They must also comply with the relevant memorandum circulars issued by the SEC when issuing green, social, sustainability and sustainability-linked bonds, it said.
The SEC said issuers should refer to the enumeration of “excluded activity” under the SFTG to determine if an economic activity qualifies as environmentally or socially sustainable and whether its financing can be categorized as aligned with the SFTG.
Further, the commission said issuers should likewise select the environmental objective of the activity, such as its relevance and strategic alignment, investors or financial institution’s priority and government and industry guidance.
Following the assessment process, economic activities may be classified as green, or those with substantial contribution to an environmental objective, or red, which are activities that do not serve any environmental objective or meet the essential criteria.
Economic activities may also be classified as amber, or those with substantial contribution to an environmental objective but causes harm to another, but which can be remediated within five years, or there is a reliable claim that remediation will take less than 10 years.
“An activity that falls under the red classification does not meet the higher sustainability ambition of the SFTG or pass the Do No Significant Harm or minimum social safeguards tests,” the SEC said.
“The classification, however, does not imply that the activity is unsustainable; such an activity may still be eligible for unlabeled financing,” it said.