SEC's climate change and sustainable finance initiatives – The Manila Times

LAST August 31, I had the honor to speak at an exclusive climate change training for GT Capital Holdings Inc. that was organized by the Institute of Corporate Directors. Other distinguished speakers also attended the training, which covered topics on the importance of environmental, social and governance (ESG) criteria on climate change, case studies on the impact of climate change on the Philippines and businesses, and climate risk measurements, among others.
I would like to share what I said in my presentation, which primarily focused on the Securities and Exchange Commission's (SEC) existing and new policies on climate change and sustainable finance.
I read in one article that the Philippines is one of the countries most at risk with climate change. According to the Global Climate Risk Index report by Germanwatch released in 2021, the Philippines was the fourth out of 180 countries most affected by extreme weather from 2000 to 2019. In those 20 years, the group recorded 317 extreme weather events in the Philippines, the highest among the top 10 countries with high scores in the climate risk index. The scores indicate levels of exposure and vulnerabilities of countries to extreme weather events. Data like this just shows you the imperative for all of us to take action.
Focus on sustainable finance has been increasing in the last couple of years. Now, the campaign on promoting sustainable finance plays a huge role in the sense that it serves as a major catalyst toward the transition to a circular economy, which helps create sustainable investments, reduces the impacts on the environment and achieves sustainable development goals in the Philippines while adhering to international climate and sustainability objectives.
In line with this, the Philippines has committed to achieving universal sustainability targets like the United Nations Sustainable Development Goals as well as national policies and programs like AmBisyon Natin 2040. The Philippines likewise fostered additional policies and initiatives, such as the Philippine Sustainable Finance Roadmap, to achieve the country's international, regional and local commitments, and strengthen the current initiatives in developing sustainable finance in the Philippines. The roadmap is designed to lay out the strategic action plan of the whole government to promote sustainable finance in the Philippines and to address climate change and other environmental and social risks.
To fully support sustainability initiatives in the Philippines and the Asean region, the SEC has issued rules to promote investments in ESG products and to encourage sustainable business practices by introducing new and innovative investment products and platforms to accelerate the shift to sustainable and inclusive finance. In 2018, the SEC adopted the Asean Green Bond Standards and provided the rules and procedures for its issuance. In 2019, the SEC also issued the guidelines on the issuance of social and sustainability bonds in line with the Asean Social Bond Standards and Asean Sustainability Bond Standards.
Such adoption of the issuance of Asean-labelled Green, Social and Sustainability (GSS) Bonds mobilized the capital market to finance initiatives for social development and environmental protection. As of July 31, 2022, the country remains one of the leading countries in the region to issue Asean-labelled GSS bonds, next only to Thailand. Of the $26.40 billion in GSS bonds issued, $6.77 billion or 26 percent were issued by Philippine companies.
The SEC also aims to take measures through the issuance of draft rules to enhance the disclosures and transparency of sustainability-related products to improve comparability between funds that incorporate ESG into the investment process such as draft rules on sustainable and responsible investment funds to provide disclosures and reporting guidance to investment companies classified as Sustainable and Responsible Investment Funds.
Meanwhile, in 2019, the SEC issued the Sustainability Reporting Guidelines for Publicly-Listed Companies (SR guidelines). Currently, the SEC's Corporate Governance and Finance Department is working on revising the SR guidelines to assess the preparedness of publicly listed companies (PLCs) toward adopting a mandatory approach to certain disclosures.
In the future, the SEC intends to adopt a mandatory approach to sustainability reporting for PLCs. As I mentioned a while ago, the SEC currently still adopts a “comply or explain” approach to sustainability reporting. This will now be aligned with other Asean jurisdictions, such as Thailand, Singapore, Malaysia and Indonesia, where sustainability reporting is mandatory for listed companies. Second, the SEC hopes to introduce the same requirement to all types of corporations and not just PLCs on a “comply or explain” basis. The third one is to finally adopt a mandatory approach to sustainability reporting for all types of corporations.
In addition to that, the SEC adopts international best practices and participates in global development initiatives as a member of international organizations such as the Asean Capital Markets Forum.
I hope this will give the public a good idea of what the commission focuses on to realize its vision of a sustainable future for the coming generations. Rest assured that we at the commission are working hard to enact change that will be good for the environment, the business sector, the general public, our stakeholders, and ultimately, the country.
Kelvin Lester K. Lee is a commissioner of the Securities and Exchange Commission. The views and opinions stated here are his own. You may email your comments and questions to [email protected]


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