Request for Comments on the Proposed Guidelines on the Issuance of Green Bonds under the ASEAN Green Bonds Standards

May 10, 2018 SEC MSRD TO : Banks, Investment Houses, Investing Public and All Interested Parties FOR : Request for Comments on the Proposed Guidelines on the Issuance of Green Bonds under the ASEAN Green Bonds Standards NOTICE The Securities and Exchange Commission intends to issue Guidelines on the Issuance of Green Bonds under the ASEAN Green Bonds Standards. Hence, the Commission is inviting banks, investment houses, the investing public and other interested parties to submit their views, comments and inputs to the proposed guidelines. The draft SEC Memorandum Circular is hereto attached for your reference. Commenters may submit, not later than 21 May 2018, their views, comments and inputs by email to [emailprotected] , [emailprotected] , [emailprotected] and [emailprotected] . Issued on May 10, 2018. ATTACHMENT SEC MEMORANDUM CIRCULAR NO. ____ Series of 2018 SUBJECT : GUIDELINES ON THE ISSUANCE OF GREEN BONDS UNDER THE ASEAN GREEN BONDS STANDARDS IN THE PHILIPPINES WHEREAS, in recognition of the importance of green finance in supporting sustainable growth in ASEAN and the increasing amount of global capital seeking green investments, the ASEAN Capital Markets Forum took a lead role in identifying green finance standards that can be applied for the ASEAN region beginning with the ASEAN Green Bond Standards; WHEREAS, the ASEAN Green Bonds Standards was developed based on the International Capital Markets Association's (ICMA's) Green Bonds Principles and intended to enhance transparency, consistency, and uniformity of ASEAN Green Bonds which will also contribute to the development of a new asset class, reduce due diligence costs, and help investors to make informed investment decisions; WHEREAS, Section 8 of the SRC provides that securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the Commission; WHEREAS, Section 12 of the SRC, the relevant provisions of the 2015 Implementing Rules and Regulations of the SRC (2015 SRC IRR) and "Annex C" provides for the procedure for registration of securities and non-financial disclosure requirements; WHEREAS, ASEAN Green Bonds are specific purpose bonds where proceeds will be exclusively applied to finance or refinance, in part or in full, new and/or existing eligible Green Projects, and that comply with the ASEAN Green Bond Standards; DETACa WHEREAS, the requirements under the ASEAN Green Bonds Standards shall be in addition to the applicable requirements under Sections 8 and 12 of the SRC; unless there is an available exemption under Sections 9 or 10 of the SRC, where the Issuer shall submit the requirements as prescribed by the Commission; WHEREAS, to assist issuers of debt instruments to register and issue bonds that are compliant with the ASEAN Green Bonds Standards, the Commission deems it necessary to issue the subject guidelines; WHEREAS, the subject Guidelines should be read in conjunction with the "Frequently Asked Questions" (FAQ), and subsequent amendments/updates which the Securities and Exchange Commission (SEC or Commission) may issue from time to time. NOW, THEREFORE, pursuant to the foregoing, the Commission hereby adopts and issues the following Guidelines to supplement the requirements under Sections 8 and 12 of the SRC. Guidelines for Issuance of ASEAN Green Bonds ARTICLE ONE General Provisions CHAPTER ONE Definitions SECTION 1. Applicability. This shall be known as the "Guidelines for Issuance of ASEAN Green Bonds." It shall primarily govern the issuance of the ASEAN Green Bonds where proceeds will be exclusively applied to finance or refinance, in part or in full, new and/or existing eligible Green Projects. SECTION 2. Definition of Terms . For purposes of these Guidelines, the following definition of terms shall apply, unless the context otherwise requires: A. ACMF refers to the ASEAN Capital Markets Forum. B. ASEAN refers to the Association of Southeast Asian Nations. C. ASEAN GBS refers to the ASEAN Green Bond Standards as applicable and as revised from time to time. D. ASEAN Green Bonds refers to bonds and sukuk which comply with the ASEAN GBS, where the proceeds will be exclusively applied to finance or refinance, in part or in full, new and/or existing eligible Green Projects. In the case of Islamic bonds or sukuk, it must also comply with the relevant laws and requirements applicable for the issuance of Islamic bonds or sukuk. In such instances, the Islamic bonds or sukuk may be labelled as ASEAN Green Sukuk. E. ASEAN Issuer refers to an Issuer that is incorporated in any of the ASEAN countries. F. Non-ASEAN Issuer refers to an Issuer other than an ASEAN Issuer. G. Green Bonds Principles (GBP) refers to the voluntary process guidelines issued by the International Capital Market Association (ICMA), as revised from time to time, that recommend transparency and disclosure, and promote integrity in the development of the green bond market. H. Green Projects refer to the broad categories of eligible green projects as listed in the ASEAN GBS. The list of eligible green projects is not an exhaustive list. I. Issuer refers to a corporation that issues ASEAN Green Bonds and includes an ASEAN Issuer and Non-ASEAN Issuer. J. Look-back period refers to a 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. CHAPTER TWO Scope of ASEAN Green Bonds Standards SECTION 3. Coverage of ASEAN Green Bond Standards . The ASEAN Green Bonds Standards shall apply to the issuance of ASEAN Green Bonds. SECTION 4. Suppletory Application of ICMA Green Bond Principles . The ASEAN Green Bonds Standards are aligned with the ICMA Green Bonds Principles. Any guidance issued by ICMA on the GBP should also be considered, where relevant. ARTICLE TWO Eligibility Requirements CHAPTER ONE Eligibility of Issuer SECTION 5. Requirements for Eligible ASEAN Green Bonds Issuer . The Issuer must be an ASEAN Issuer, as defined under this Rules. A non-ASEAN Issuer may also issue ASEAN Green Bonds, Provided the eligible Green Projects is located in any of the ASEAN countries. HEITAD CHAPTER TWO Eligibility of Issuance SECTION 6. Requirements for Eligible ASEAN Green Bonds Issuance . ASEAN Green Bonds issuances must be originated from any of the ASEAN member countries. ARTICLE THREE Core Components of the ASEAN Green Bonds Standards CHAPTER ONE Use of Proceeds SECTION 7. Requirements for Eligible Green Projects . All designated Green Projects must provide clear environmental benefits, which will be assessed and, where feasible, quantified by the Issuer. SECTION 8. Eligible Green Project Categories . There are several broad categories of eligibility for Green Projects that address key areas of environmental concern. The following list is intended to be indicative and captures the most commonly used types of projects supported or expected to be supported by the green bond market. The categories, listed in no specific order, include, but are not limited to A. renewable energy; B. energy efficiency; C. pollution prevention and control; D. environmentally sustainable management of living natural resources and land use; E. terrestrial and aquatic biodiversity conservation; F. clean transportation; G. sustainable water and waste water management; H. climate change adaptation; I. eco-efficient and/or circular economy adapted, production technologies and processes; and, J. green buildings which meet regional, national or internationally recognized standards or certifications. SECTION 9. Green Projects Covering Two or More Categories . Green Projects may relate to more than one category. SECTION 10. Ineligible Green Project . Fossil fuel power generation projects are excluded from the ASEAN Green Bonds Standards. CHAPTER TWO Process for Project Selection and Evaluation SECTION 11. Project Evaluation and Selection Process Determination . The Issuer must establish the process for project evaluation and selection prior to the issuance of the ASEAN Green Bonds. Issuers are encouraged to position this information within the context of the Issuers' overarching objectives, strategy, policy and/or processes relating to environmental sustainability. CHAPTER THREE Management of Proceeds SECTION 12. Treatment of Net Proceeds . The net proceeds from the ASEAN Green Bonds, or an amount equal to these net proceeds, must be credited into a sub-account, moved to a sub-portfolio or otherwise tracked by the Issuer in an appropriate manner and attested to by a formal internal process linked to the Issuer's lending and investment operations for Green Projects. SECTION 13. Simultaneous Deployment of Net Proceeds . The total amount deployed from the net proceeds for the eligible Green Projects need not occur simultaneously. SECTION 14. Periodic Adjustment of Net Proceeds Balance . The balance of tracked proceeds of outstanding ASEAN Green Bonds must be periodically adjusted to match allocations to eligible Green Projects made. CHAPTER FOUR Reporting Requirements SECTION 15. Disclosures at the Time of Issuance and during the Tenure of the ASEAN Green Bonds . The Issuer must make the following publicly available on an Issuer-designated website at the time of the issuance and throughout the tenure of ASEAN Green Bonds: A. the process for project evaluation; and, B. the use of proceeds. SECTION 16. Documentation on the Use of Proceeds . The utilization of proceeds from the ASEAN Green Bonds must be described in the documentation for issuance of the ASEAN Green Bonds. The Issuer must disclose the following information A. the categories of eligible Green Projects to which the ASEAN Green Bonds proceeds will be allocated; and/or B. the information on specific Green Projects in the case where the Issuer has identified the specific Green Projects to which the ASEAN Green Bonds proceeds will be allocated. SECTION 17. Continuous Reporting on the Use of Proceeds . Issuers must report to investors at least on an annual basis until full allocation, and as necessary thereafter in the event of material developments the following: A. a list of the projects to which the ASEAN Green Bonds proceeds have been allocated; B. brief description of the projects; and, C. the amounts allocated and their expected impact. It is recommended that Issuers use qualitative performance indicators, and where feasible, quantitative performance measures with disclosures of the key underlying methodology and/or assumptions used in the quantitative determination. SECTION 18. Documentation in Case of Confidential Agreements, Competitive Considerations, or Large Number of Underlying Projects . Where confidentiality agreements, competitive considerations, or a large number of underlying projects limit the amount of detail that can be made available, the Issuer may present the information in generic terms or on an aggregated portfolio basis. SECTION 19. Quantitative Performance Measures. In relation to Section 17 of these Guidelines, the following quantitative performance 1 measures may be employed by the Issuer: A. energy capacity; B. electricity generation; C. greenhouse gas emissions reduced/avoided; ATICcS D. number of people provided with access to clean power; E. decrease in water use, reduction in the number of cars required; and/or F. other reasonable performance measures. SECTION 20. Disclosures in Case the Proceeds is Used for Refinancing. In the event that all or a proportion of the proceeds is or may be used for refinancing, it is recommended that Issuers A. provide an estimate of the share of financing and refinancing; B. clarify which investments or project portfolios may be refinanced if appropriate; and, C. state the expected look-back period for refinanced Green Projects, to the extent relevant. SECTION 21. Disclosure of the Project Evaluation and Selection Process . The Issuer should disclose the project evaluation and selection process to investors. SECTION 22. Contents of Disclosures on Project Evaluation and Selection Process . In connection with the immediately preceding Section , the Issuer of ASEAN Green Bonds must clearly communicate to investors A. the environmental sustainability objectives; B. the process by which the Issuer determines how the projects fit within the eligible Green Projects categories identified under (A); and C. the related eligibility criteria, including, if applicable, exclusion criteria or any other process applied to identify and manage potentially material environmental and social risks associated with the Green Projects. Issuers are also encouraged to disclose any green standards or certifications referenced in project selection. SECTION 23. Disclosures on the Management of Proceeds . The Issuer must disclose to investors in the documentation for the issuance of the ASEAN Green Bonds A. the process for managing the net proceeds from the ASEAN Green Bonds; and, B. the intended types of temporary placement for the balance of unallocated proceeds. SECTION 24. Form of Annual Reporting and External Review . The Issuer must provide to investors the annual reports and the external review on the annual reports, if any, through an Issuer-designated website and/or through annual reports throughout the tenure of the ASEAN Green Bonds. SECTION 25. Frequency of Reporting . In addition to annual reporting in Sec. 17 and Sec. 24 , Issuers are encouraged to provide more frequent periodic reporting which would increase transparency on the allocation of proceeds and investor confidence on the ASEAN Green Bonds. ARTICLE FOUR External Review CHAPTER ONE Qualifications of External Review Providers SECTION 26. Expertise and Experience Requirement . The external review provider must have the relevant expertise and experience in the components of the ASEAN Green Bonds which they are reviewing. SECTION 27. Disclosure of External Reviewers' Expertise and Scope . The external reviewers' credentials under Sec. 26 and scope of review conducted must be made publicly accessible from a website designated by the Issuer throughout the tenure of the ASEAN Green Bonds. CHAPTER TWO External Review Requirement SECTION 28. Appointment of External Review Providers . Issuers are recommended to appoint external review providers for their ASEAN Green Bonds issuances. SECTION 29. External Review of the Project Evaluation and Selection Process . It is recommended that the Issuer's process for project evaluation and selection under Sec. 11 of these Rules be supported by an external review. SECTION 30. External Review of the Management of Proceeds . It is recommended that the Issuer's management of proceeds under Art. II Chapter 3 be supplemented by the use of an auditor, or other third party to verify the internal tracking method and the allocation of funds from the ASEAN Green Bonds proceeds. SECTION 31. External Review of the Use of Proceeds . It is recommended that the Issuer's annual reporting on the use of proceeds under Art. II Chapter 1 be supplemented by a confirmation of such use of proceeds by an external reviewer along with any relevant updates of the external review. CHAPTER THREE Coverage and Types of Review SECTION 32. Partial or Full Review . The external review may be Partial , covering only certain aspects of the Issuer's ASEAN Green Bonds framework or Full , assessing alignment with all four core components as stated in the ASEAN Green Bonds Standards. SECTION 33. Types of Review . External review can fall under the following levels and/or types: A. Consultant Review B. Verification C. Certification D. Rating SECTION 34. Consultant Review . Consultant Review involves an Issuer seeking advice from consultants and/or institutions with recognized expertise in environmental sustainability or other aspects of the issuance of ASEAN Green Bonds, such as the establishment/review of an Issuer's ASEAN Green Bonds framework. SECTION 35. Verification. Verification involves an Issuer having its ASEAN Green Bonds, associated ASEAN Green Bonds framework, or underlying assets independently verified by qualified parties, such as auditors. In contrast to certification, verification may focus on alignment with internal standards or claims made by the Issuer. TIADCc SECTION 36. Certification. Certification involves an Issuer having its ASEAN Green Bonds or associated ASEAN Green Bonds framework or use of proceeds certified against an external green assessment standard. An assessment standard defines criteria, and alignment with such criteria is tested by qualified third parties/certifiers. SECTION 37. Rating. Rating involves an Issuer having its ASEAN Green Bonds or associated ASEAN Green Bonds framework rated by qualified third parties, such as a specialized research provider or rating agency. SECTION 38. Green Bond Ratings Different from Environmental Rating, etc. Green bond ratings are separate from an Issuer's environmental, social and governance rating. CHAPTER FOUR External Review Report SECTION 39. Contents of External Review Report . The External Review Provider must disclose their relevant credentials and expertise, and the scope of the review conducted in the external review report. SECTION 40. External Review Report of the Project Evaluation and Selection Process . The Issuer must make the External Review Report of the project evaluation and selection process, if review is conducted in connection with Sec. 29 hereunder, publicly available on a website designated by the Issuer at the time of the issuance and throughout the tenure of ASEAN Green Bonds. SECTION 41. External Review Report of the Management of Proceeds. Where the Issuer appoints an auditor or other third party to verify the Issuer's management of proceeds conducted in connection with Sec. 30 , the Issuer must make the auditor or other third party report publicly available on a website designated by the Issuer at the time of the issuance of the ASEAN Green Bonds. ARTICLE SIX n Retroactive Effect SECTION 42. Retroactivity. In certain circumstances, and at the discretion of the Commission, Outstanding bonds issued by Philippine-Based issuer and/or in instances where the proceeds were used in the Philippines, will be considered for eligibility under the ASEAN Green Bonds Standards, Provided the issuer or issuance already carries an internationally recognized green label ( e.g. , Climate Bond Initiative certification or GBP compliant). ARTICLE SEVEN Limitations on ASEAN Green Bond Label SECTION 43. Limitation on the Use of ASEAN Green Bond Label . Consistent with public interest and protection of investors, the call for transparency, as well as to ensure integrity of the ASEAN Green Bonds, the Commission reserves the right to direct any Issuer from using the "ASEAN Green Bond" label. ARTICLE EIGHT Effectivity SECTION 44. Effectivity. These Guidelines shall take effect fifteen (15) days after its publication in a newspaper of general circulation. AIDSTE May __, 2018, Pasay City Philippines. TERESITA J. HERBOSA Chairperson Footnotes 1. Quantitative performance measures as provided by ICMA GBP. n Note from the Publisher: Copied verbatim from the official document. Missing Article Five.