The Securities and Exchange Commission (“SEC”) issued and approved the Guidelines on the Issuance of Green Bonds under the ASEAN Green Bonds in the Philippines (“Guidelines”) on 16 August 2018, adopting the ASEAN Green Bond Standards (“GBS”) and providing for the rules and procedures for the issuance of ASEAN Green Bonds in the Philippines.

ASEAN Green Bonds were developed in response to the ASEAN Capital Market Forum’s initiative to develop a green asset class to support sustainable growth in the ASEAN, particularly in meeting the ASEAN’s infrastructure needs. The ASEAN GBS were launched on 08 November 2017 and were based on the International Capital Market Association’s Green Bonds Principles, which are suppletorily applicable to the Guidelines.

The table below summarizes key features of the Guidelines:

What are ASEAN Green Bonds?

ASEAN Green Bonds are bonds and sukuk (sharia-compliant bonds) which comply with the ASEAN GBS, whose proceeds will be exclusively applied to finance or refinance, in part or in full, new and/or existing eligible Green Projects.

ASEAN Green Bonds must still comply with the requirements for the issuance of regular bonds under the Securities Regulation Code. In cases of sukuk, they must also comply with the relevant laws and requirements for the issuance of sukuk.

What are Eligible Green Projects?

Eligible Green Projects are those which have clear environmental benefits which can be assessed and, if feasible, quantified by the issuer. These must address key areas of environmental concern, such as but not limited to the following:

  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 expressly excluded from the ASEAN GBS.

Green projects may relate to more than one category.

Who may issue ASEAN Green Bonds?

The issuer may be:

  1. An ASEAN issuer, i.e. an issuer incorporated in any of the ASEAN countries; or
  2. A non-ASEAN issuer, provided that the Eligible Green Project/s is/are located in any of the ASEAN countries.

However, the issuance of the ASEAN Green Bonds must originate from an ASEAN member country.

What are the requirements with respect to the process for project selection and evaluation?

The issuer must establish a process for project evaluation and selection prior to the issuance of the ASEAN Green Bonds. This process must be disclosed to investors in the documentation for the issuance of the ASEAN Green Bonds and must contain the following:

  1. The environmental sustainability objectives;
  2. The process by which the issuer determines how the projects fit within the Eligible Green Projects categories under the Guidelines; and
  3. The related eligibility criteria, including, if applicable, exclusion criteria or any other process applied to identify and manage potentially material environmental and societal risks associated with the Green Projects.

Issuers are also encouraged to disclose any green standards or certifications referenced in project selection.

What are the required disclosures in relation to the use of the proceeds from the ASEAN Green Bonds?

The utilization of the proceeds must be described in the documentation for their issuance and must include the following:

  1. The categories of Eligible Green Projects to which the proceeds will be allocated; and/or
  2. The information on specific Green Projects, in the case where the issuer has identified the specific Green Projects to which the proceeds will be allocated.

Where some or all of the proceeds are or may be used for refinancing, it is recommended that issuers also:

  1. Provide an estimate of the share of financing and refinancing;
  2. Clarify which investments or project portfolios may be refinanced if appropriate; and
  3. State the expected look-back period for refinanced Green Projects, e. the maximum period in the past that an issuer will look back to identify assets/earlier disbursements to such Eligible Green Projects that will be included in the green bond reporting.

Issuers must also report the following information to investors, on an annual basis until full allocation and as may be necessary thereafter in the event of material developments:

  1. A list of the projects to which the ASEAN Green Bonds proceeds have been allocated;
  2. A brief description of the projects; and
  3. The amounts allocated and their expected impact.

Issuers are also recommended to report qualitative and quantitative performance measures.

Issuers are also encouraged to provide more frequent periodic reporting.

Where and when should disclosures regarding the process for project evaluation and use of proceeds by an issuer be made?

The issuer must make the disclosures and annual reports regarding the process for project evaluation and the use of proceeds publicly available on an issuer-designated website at the time of the issuance and throughout the tenure of the ASEAN Green Bonds.

How are the net proceeds from the ASEAN Green Bonds managed?

The issuer must track the net proceeds in an appropriate manner, attested to by a formal internal process linked to the issuer’s lending and investment operations for Green Projects (e.g. by crediting them to a sub-account or moving them to a sub-portfolio). As long as the ASEAN Green Bonds are outstanding, the balance of the tracked proceeds must be periodically adjusted to match allocations made to Eligible Green Projects.

The total amount deployed from the net proceeds for the Eligible Green Projects need not occur simultaneously.

What are the required disclosures regarding management of the net proceeds from the ASEAN Green Bonds?

The issuer must disclose the following information to investors in the documentation for the issuance of ASEAN Green Bonds:

  1. The process for managing the net proceeds from the ASEAN Green Bonds; and
  2. The intended types of temporary placement for the balance of unallocated proceeds.

Is external review required for the issuance of ASEAN Green Bonds?

Under the guidelines, external review for the issuance of ASEAN Green Bonds, the project evaluation and selection process, and the management and use of the net proceeds of the ASEAN Green Bonds are merely recommendatory. The external review may be partial or full.

However, if the issuer chooses to use an external review, whether full or partial, it becomes mandatory to disclose the external review report, the external reviewers’ credentials, and the scope of the review on the issuer-designated website. For external review reports of the project evaluation and selection process, the report must be available at the time of the issuance and throughout the tenure of the ASEAN Green Bonds; for external review reports of the management and use of the proceeds, it must be available at the time of the issuance of the ASEAN Green Bonds.

Who are eligible to external review providers under the Guidelines?

To be eligible, the external review provider must have relevant expertise and experience in the components of the ASEAN Green Bonds which they are reviewing. They must disclose their relevant credentials and expertise and the scope of the review conducted in the external review report.

Do the Guidelines apply to previously existing bonds?

Outstanding bonds issued by a Philippine-based issuer and/or in instances where the proceeds were used in the Philippines may be considered for eligibility under the ASEAN GBS, if:

  1. The issuance is compliant with the requirements under the Guidelines; and
  2. The issuance already carries an internationally recognized green label.

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