THE Securities and Exchange Commission (SEC) has greenlit the guidelines for the issuance of social and sustainability bonds in line with regional standards.
The commission en banc approved the Guidelines on the Issuance of Social Bonds under the Association of Southeast Asian Nations (ASEAN) Social Bond Standards (SBS), or SEC Memorandum Circular No. 9, during its April 25 meeting.
The ASEAN SBS was developed by the ASEAN Capital Markets Forum, which aims to provide an alternative funding route for companies whose projects provide a social benefit. On the sidelines of the Sustainable Finance Dialogue Forum in Makati Tuesday, SEC Commissioner Ephyro Luis B. Amatong told reporters examples of projects with social benefit include those providing “medical assistance, education, low-cost housing, water.”
On the other hand, projects involved in alcohol, gambling, tobacco, and weaponry may not be used for the issuance of social bonds, as per Section 11 of the memorandum.
The project must also specify a target population, including those living below the poverty line, marginalized populations, vulnerable groups, the unemployed, people with disabilities, migrants or displaced persons, the undereducated, and underserved, according to Section 12 of the approved guidelines.
The social bonds must be issued by an ASEAN-member country. A non-ASEAN issuer may also register provided that the project where the funds will be used is located in an ASEAN country.
The same en banc session saw the approval of the Guidelines on the Issuance of Sustainability Bonds Under the ASEAN Sustainability Bond Standards (SUS), or SEC Memorandum Circular no. 8.
Mr. Amatong explained that sustainability bonds are like a combination of green bonds and social bonds, so that a project with social benefits may also be environmentally friendly.
“So when you have an energy-efficient, low-cost housing project, potentially that is sustainable use of proceeds,” Mr. Amatong cited as an example.
As such, issuers of sustainability bonds must be compliant with both the ASEAN SBS and ASEAN Green Bond Standards (GBS). The SEC approved the guidelines for the latter back in August 2018.
Projects allowed under the ASEAN GBS include those for renewable energy, energy efficiency, pollution prevention and control, environmentally sustainable management of living natural resources and land use, terrestrial and aquatic biodiversity conservation, clean transportation, and climate change adaptation, among others.
Following their issuance, Mr. Amatong said the bonds will be listed on the Philippine Dealing & Exchange Corp., similar to regular bonds.
Companies who issue social and sustainability bonds must also provide an annual report of the offering’s use of proceeds, to ensure that the money raised were actually used for socially beneficial projects.
“The benefit is just attracting investor diversification. If you diversify enough, the pricing becomes tighter… So the more people who want to loan to you, that will make the cost of borrowing lower,” Mr. Amatong said. — Arra B. Francia
