The Philippine Securities and Exchange Commission (SEC) has released a draft memorandum circular outlining the Green Equity Guidelines, a comprehensive framework aimed at promoting the issuance of green equity in the country. This groundbreaking initiative is part of the Philippines’ commitment to achieving global sustainability targets under the Paris Agreement and the United Nations Sustainable Development Goals (SDGs).
It would support companies engaging in environmentally sustainable activities to build a low-carbon and climate-resilient economy. By keeping the guidelines consistent with the Philippine Sustainable Finance Taxonomy Guidelines and the ASEAN Taxonomy for Sustainable Finance, this framework would align the Philippines at the forefront of sustainable finance within the region.
Among the components of the guidelines is the revenue and investment criteria. Those firms that would like to issue green equity must show evidence that at least 50% of their revenues and investments come from activities qualified as green under the SFTG and ASEAN Taxonomy. This threshold means that businesses with higher contributions toward sustainability in the environment will be prioritized.
To ensure transparency and accountability, the framework also requires the reporting of key performance indicators (KPIs) that are related to environmental objectives. These KPIs should be measurable, benchmarkable, and verifiable through external checks. Companies will have to report progress on their chosen websites so that stakeholders and investors can track their contribution to sustainability goals. This transparency is likely to increase investor confidence and attract capital flows toward green-focused businesses.
External reviews are another critical aspect of the guidelines. Companies issuing green equity must be assessed by independent external reviewers to ensure that they meet the criteria set. These review reports will be made public, further increasing investor confidence and encouraging adherence to sustainable practices.
The overall objective of the Green Equity Guidelines is to increase the visibility of companies contributing to environmental sustainability while offering another sustainable investment option besides the already existing instruments such as green bonds. The framework is expected to attract local and international investors looking to support businesses that are in line with a low-carbon economy, thereby strengthening the country’s sustainable finance ecosystem.
To get the Green Equity label, companies must be in compliance with strict regulatory standards. The submission of applications to the SEC’s MSRD and thorough updates on the environmental targets as well as performance of KPIs, plus alignment with the taxonomy guidelines are required. There is also the annual limited review and the thorough triennial assessments to be qualified for the retention of the label.
The SEC, however has made it a point that integrity must be ensured in the granting of green equity. The right to withdraw the Green Equity mark is still left with the commission if a firm’s activities are found not to have met the expected standards. SRC and other related laws may impose penalties on the firms violating the guidelines.
The draft guidelines have been placed open for public consultation. All stakeholders are called upon to forward their comments in writing via e-mail before January 25, 2025. The SEC will fine-tune the framework based on the input received, to make it more practical and effective in promoting sustainable finance. The interested parties may refer to more details on the official website of the SEC.
This is a major step forward in the Philippines’ sustainability agenda. The SEC aims to mobilize resources for climate-resilient and environmentally friendly projects by providing a robust framework for green equity issuance. As the country continues its journey toward a sustainable future, these guidelines underscore the vital role of regulatory measures in fostering a green economy.