THE Securities and Exchange Commission (SEC) is currently drafting guidelines on the issuance of social bonds aligned with regional standards, as it looks to offer new ways of financing social projects.
In a notice posted on its website, the country’s corporate regulator said the guidelines will cover the issuance of social bonds as per the ASEAN Social Bonds Standards developed by the ASEAN Capital Markets Forum (ACMF).
This will complement the SEC’s issuance of guidelines for ASEAN Green Bond Standards last year, which now serve as an alternative funding route for companies with green or environmentally friendly projects, based on standards set by the commission.
Under the proposed guidelines, a company looking to issue social bonds must be from an ASEAN-member country. A non-ASEAN issuer may also register provided that the project where the funds will be used for is located in any ASEAN country.
ASEAN is comprised of the Philippines, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, and Vietnam.
Proceeds of the offering must go to projects that provide clear social benefits to be assessed and quantified, where feasible, by the issuer.
Article 2, Section 9 of the proposed guidelines list down examples of the eligible social projects, which “directly aim to help address or mitigate a specific social issue and/or seek to achieve positive social outcomes especially but not exclusively for a target population.”
The list includes projects that promote affordable basic infrastructure such as clean drinking water, sewers, and sanitation; access to essential services such as health, education, and health care; affordable housing, employment generation, food security, and socioeconomic advancement, among others.
Projects that pose a negative social impact related to alcohol, tobacco, and weaponry are not allowed.
The projects must have specific target populations, which may include those living below the poverty line, marginalized populations, vulnerable groups including those as a result of natural disasters, the unemployed, people with disabilities, migrants or displaced persons, the undereducated, and underserved, among others.
The SEC proposed that issuers be the one to establish the process for project evaluation and selection before the issuance of the social bonds. The issuer must also disclose the process for project evaluation and selection process to investors.
The draft guidelines state that issuers must also continuously report the use of the funds from the social bonds.
“It is recommended that issuers use qualitative performance indicators, and where feasible, quantitative performance measures and disclose of the key underlying methodology and/or assumptions used in the quantitative determination,” according to the draft.
Quantitative performance measures may include the number of beneficiaries of the project, the reduction in unemployment, the increase in number of public transport users, increase in literacy rate, and increase in life expectancy.
These must be presented in an annual report, as well as an external review of the annual report, through the issuer’s website throughout the tenure of the social bonds.
The SEC is asking banks, investment houses, the investment public, and other interested parties to submit their comments on the proposed guidelines until April 24. — Arra B. Francia