SEC issues guidelines on blue bonds

The Securities and Exchange Commission (SEC) has released new guidelines on the issuance of blue bonds, pushing the capital markets as one of the avenues for promoting sustainability in the corporate sector.

The Commission on September 21 issued Memorandum Circular No. 15, Series of 2023 (MC 15), providing Guidelines on Eligible Blue Projects and Activities for the Issuance of Blue Bonds in the Philippines.

Blue bonds refer to a subset of green bonds and sukuk whose proceeds will exclusively be used to finance or refinance new and/or existing eligible blue projects and activities.

Blue projects may include ecosystem management and natural resources restoration of coastal, marine, river, lake, and other marine- or water-based ecosystems; sustainable fisheries management; and sustainable aquaculture, among others, as long as they directly aim to address sustainable water management and ocean protection.

They must also substantially contribute to objective numbers 6 and/or 14 of the United Nations Sustainable Development Goals, which seeks to ensure availability and sustainable management of water and sanitation for all, and Conserve and sustainably use the oceans, seas and marine resources for sustainable development, respectively.

Such contribution shall be assessed and quantified, if possible, by the issuer.

Quantifiable performance measures include greenhouse gas emissions reduced or avoided, ocean-based renewable power generation or energy savings, water savings, plastic waste reduced or avoided, and wastewater treated or avoided, among others.

The guidelines must be read and applied in conjunction with SEC Memorandum Circular No. 12, Series of 2018 (MC 12), or the Guidelines for the Issuance of ASEAN Green Bonds under the ASEAN Green Bonds Standards in the Philippines. As such, issuers of blue bonds must also comply with MC 12.

The issuance of blue bonds must also comply with Sections 8 and 12 of Republic Act No. 8799, or the Securities Regulation Code, on the registration of securities.

The guidelines are based on the Blue Finance Guidance Framework developed by the International Finance Corporation and the Green and Blue Bond Framework of the Asian Development Bank.

The Commission has consistently promoted the growth of sustainable bonds and projects in the Philippines over the past five years.

Since the issuance of guidelines for green bonds in 2018, it has also released SEC Memorandum Circular Nos. 8 and 9, Series of 2019, or the Guidelines on the Issuance of Social Bonds Under the Association of Southeast Asian Nations Social Bond Standards and the Guidelines on the Issuance of Sustainability Bonds Under   the   ASEAN Sustainability   Bond   Standards, respectively.

In 2019, the SEC also issued Memorandum Circular No. 4, Series of 2019, instituting Sustainability Reporting Guidelines for Publicly Listed Companies.

Earlier this year, the SEC adopted the ASEAN Sustainable and Responsible Fund Standards, which will allow both local and ASEAN-member investment companies and collective investment scheme operators to offer sustainable and responsible funds locally and across the region.

The Commission further adopted the ASEAN Sustainability-Linked Bond Standards through SEC Memorandum Circular No. 3, Series of 2023, which seeks to provide guidance on the issuance of ASEAN Sustainability-Linked Bonds (SLBs).

SLBs are defined as any type of bond instrument for which financial and/or structural characteristics can vary depending on whether the issuer achieves predefined sustainability/environmental, social and governance objectives.