SEC readies ‘blue’ bonds framework

THE Securities and Exchange Commission (SEC) is set to release a “blue” bond framework that could drive funds to support the sustainability of water resources, a commissioner said.

“It’s similar to the green bond framework but it’s more blue-based, meaning more water [and] water resources. That’s something coming up soon,” SEC Commissioner Kelvin Lester K. Lee told BusinessWorld on the sidelines of a press briefing on Friday.

Mr. Lee said the blue bond framework comes as the commission continues to move for wider adoption of sustainability standards.

He said the SEC aims to release the framework by the second quarter of the year. The commission previously set guidelines for the issuance of green bonds, which allowed companies to raise funds for climate and environment projects.

The proposed framework follows the securities regulator’s release of a draft circular adopting the Association  of Southeast Asian Nations (ASEAN) Sustainable and Responsible Fund Standards (SRFS), which seeks to align with ASEAN member states in establishing and promoting sustainable and responsible investment funds.

“The point is, in this day and age, sustainability [and] sustainable finances are important already. We want to drive money and flows of funds towards green investments to support the whole net-zero issue,” Mr. Lee said.

The ASEAN SRFS applies to investment companies including the sub-funds of umbrella funds and companies seeking to offer investments locally or across borders in other ASEAN member states.

According to the draft, the commission requires investment companies to be registered under the Investment Company Act and the Securities Regulation Code, and comply with rules relating to sustainable and responsible investment (SRI) funds and ASEAN SRFS.

Additionally, the required payment is PHP 10,000 for local companies and PHP 80,000 for foreign companies, plus 1% of the said fee as a legal research fee.

The SEC’s Memorandum Circular No. 11, Series of 2022, or the Rules on Sustainable and Responsible Investment Funds, provides guidelines for investment companies that qualify as SRIs.

Foreign companies are also required to present proof of their qualifications as an ASEAN SRF. They also need to disclose the percentage of net asset value (NAV) that would be devoted to non-environmental, social, and governance matters.

Companies are also required to submit their strategies and objectives for attaining sustainable investments.

“The ASEAN SRF should primarily invest in securities which are in accordance with its sustainable investment objectives and strategies,  with a minimum asset allocation of at least two-thirds of its NAV, at all times,” the SEC said.

A violation of the rules translates to a penalty of between PHP 20,000 and PHP 100,000, depending on the provisions violated. A violator could incur a fine of PHP 400 to PHP 1,200 per day for continued violations.

According to Mr. Lee, the draft circular was released for public dissemination and is set for release in two to three weeks. — Adrian H. Halili