Green Bonds in the Philippines: A Guide for Foreign Companies to Fund Sustainable Project

Historical Background

The concept of green bonds emerged in 2007, as introduced by the European Investment Bank and the World Bank. These financial instruments were designed to fund projects that had positive environmental impact, such as renewable energy, waste management, and climate-resilient infrastructure. As climate change intensified globally, green bonds became a critical tool for mobilizing capital to support sustainability.

In November 2017, the ASEAN Capital Markets Forum (ACMF), a collaborative initiative among capital market regulators from ASEAN countries, launched the ASEAN Green Standards (ASEAN GBS). These standards were based on the globally recognized International Capital Market Association (ICMA) Green Bond Principles but tailored for the ASEAN region. The ASEAN GBS promotes transparency, consistency, and environmental integrity for green bonds within member states.

The Philippines, as one of the most climate-vulnerable countries, saw the importance of sustainable finance in addressing environmental challenges. The SEC adopted the ASEAN GBS to encourage Philippine companies to participate in this growing global marker while adhering to international best practices.

Understanding Green Bonds and ASEAN Green Bonds Standards

Green bonds are debts instruments specifically earmarked to finance environmentally sustainable projects. The ASEAN Green Bonds are designed to:

• Support the development of green finance across ASEAN nations;
• Ensure consistency and comparability of green bonds issued within the region;
• Mitigate the risk of greenwashing by requiring strict compliance with eligibility criteria and reporting standards.

In line with these, several regulations were enacted by the Philippine Securities and Exchange Commission (SEC):

1. SEC Memorandum Circular No. 12, S. of  2018;
2. SEC Memorandum Circular No. 8, S. of 2019;
3. SEC Memorandum Circular No. 3, S. of 2023;
4. SEC Memorandum Circular No. 15, S. of 2023;
5. SEC Memorandum Circular No. 5, A. 2024

SEC Memorandum Circular 12, Series of 2018 or “Guidelines on the issuance of Green Bonds under the ASEAN Green Bonds standards in the Philippines”

The foundation of the SEC’s efforts began with SEC Memorandum Circular No. 12, Series of 2018, which introduced the guidelines for green bonds under the ASEAN Green Bonds Standards. This circular set the baseline by requiring that green bond proceeds exclusively fund eligible projects such as renewable energy, sustainable water management, and pollution prevention. By aligning with international standards, this circular provided the necessary structure to attract both local and global investors, establishing the credibility of Philippine green bonds.

Specific guidelines were provided to ensure integrity and credibility of green bonds issued in the Philippines :

1.  Eligibility of Projects

Proceeds from green bonds must exclusively finance or refinance eligible projects which include but are not limited to:

• Renewable Energy: Solar, wind, hydropower and geothermal projects;
• Energy Efficiency: Initiatives aimed at reducing energy consumption such as smart grids and energy efficient-buildings;
• Pollution Prevention and Control: Waste Management, recycling, and pollution reduction technologies;
• Sustainable Land Use: Reforestation, sustainable forestry, and biodiversity conservation projects;
• Clean Transportation: Investments in electric vehicles, public transport systems, and infrastructure supporting low-carbon mobility;
• Climate Change Adaptation: Projects that enhance resilience to climate risk, such as flood defenses and sustainable urban planning.

2. Issuer Requirements

Companies issuing green bonds under the AGBS must:

• Clearly specify the use of proceeds in alignment with the defined eligible green projects;
• Provide a detailed project description, including expected environmental benefits;
• Obtain an independent external review (e.g., certification, verification, or assessment) to validate compliance with AGBS.

3. Reporting and Transparency

Transparency is central to the green bond framework. Issuers are required to:

• Publish annual reports on the allocation of proceeds until the proceeds have been fully utilized;
• Disclose the environmental impact of the financed projects, including metrics such as energy savings, emissions reductions, or biodiversity improvements;
• Maintain a clear and robust process for tracking and managing proceeds, typically through a separate account or sub-account.

4.  Alignment with ASEAN Criteria

• Regional focus: Green projects must primarily benefit ASEAN countries;
• Exclusion of Controversial Projects: Projects involving fossil fuels, nuclear power, or other environmentally controversial activities  are not eligible.

Recognizing the interconnected nature of environmental and social goals, the SEC expanded its scope with SEC Memorandum Circular No. 08, Series of 2019, which introduced sustainability bonds. Unlike green bonds, sustainability bonds allowed issuers to finance projects with dual objectives: addressing environmental concerns and promoting social welfare. For instance, a bond could simultaneously fund renewable energy initiatives and affordable housing projects. This circular built on the foundational transparency and disclosure requirements of the green bonds framework while broadening the impact to include social development.

Building on this momentum, SEC Memorandum Circular No. 03, Series of 2023 introduced sustainability-linked bonds, which marked a significant evolution in sustainable finance. Unlike traditional bonds that allocate proceeds to specific projects, sustainability-linked bonds are tied to an issuer’s overall performance on predefined sustainability targets, such as reducing greenhouse gas emissions or increasing renewable energy capacity. This innovative approach incentivizes issuers to embed sustainability into their core business strategies. The circular complements earlier guidelines by providing issuers with the flexibility to achieve measurable ESG outcomes beyond project-level financing.

Blue Bonds

As the SEC continued to refine its sustainable finance framework, it recognized the unique challenges posed by marine and water sustainability. To address these, SEC Memorandum Circular No. 15, Series of 2023 introduced guidelines for blue bonds, which specifically target projects related to ocean conservation, sustainable fisheries, and clean water infrastructure. These bonds align with the ASEAN Green Bonds Standards while adding specific criteria for marine and water-related initiatives. Blue bonds represent a natural extension of the green and sustainability bonds framework, addressing critical environmental challenges unique to the Philippines as an archipelagic nation.

To tie all these efforts together and ensure consistency across sustainable finance instruments, the SEC released SEC Memorandum Circular No. 05, Series of 2024, which established the Philippine Sustainable Finance Taxonomy. This initiative provides a comprehensive classification system for sustainable economic activities, offering clarity on what qualifies as environmentally or socially sustainable. By mitigating risks such as greenwashing and providing a standardized reference for issuers and investors, the taxonomy acts as the glue that unifies the earlier circulars, ensuring that all sustainable finance instruments adhere to the same high standards.

Benefits of Issuing Green Bonds in the Philippines

For foreign companies, engaging in green bond issuances under the SEC’s framework offers numerous advantages:

1. Access to a Growing Market
   The Philippines, with its strong demand for sustainable infrastructure and renewable energy, presents vast opportunities for green investments. Green bonds offer an effective mechanism to access capital for these projects.
2. Favorable Regulatory Environment
   The SEC’s guidelines provide a clear and structured pathway for green bond issuances, ensuring ease of compliance while maintaining high environmental and governance standards. 
3. Enhancing Credibility and Investor Confidence
   Alignment with the ASEAN Green Bonds Standards reassures investors about the environmental integrity of the projects, increasing market confidence and potentially lowering financing cost. 
4. Contribution to Global Sustainability Goals
   Foreign companies can align their projects with the United Nations Sustainable Development Goals (SDGs), particularly SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate Action), strengthening their commitment to global sustainability.
5.  Strengthening Stakeholder Relationships
   Issuing green bonds signals a strong commitment to Environmental, Social and Governance (ESG) Principles, enhancing relationships with governments, regulators, and local communities.

Opportunities of Foreign Investors

• The Philippine’s transition to a greener economy opens doors for foreign companies to:
• Develop renewable energy projects to meet growing energy demands sustainability;
• Invest in sustainable transport solutions, such as electric vehicle infrastructure or modernized public transport systems;
• Build climate-resilient infrastructure in flood-prone or disaster affected areas;
• Participate in urban sustainability projects, including eco-friendly housing and smart cities.

FORVIS MAZARS CORPORATE SECRETARIAL SERVICES 

Navigating the complexities of green bond issuances requires expertise and precision. Forvis Mazars Corporate Secretarial Services offers comprehensive support to ensure your success in the Philippine Market.  Our team of experts can help guide foreign corporations on the formation of entities that will enter the Philippine renewable energy market.  For companies that are already in existence, we can provide support on regulatory compliance.

Let Forvis Mazars be your partner in turning sustainable ambitions to impactful results. Contact us today to explore how we can help you thrive in the Philippine’s green economy