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Philippine SEC Proposes Draft Rules for SRI Funds

The Philippine Securities and Exchange Commission (SEC) has proposed new draft rules for sustainable and responsible investment (SRI) funds.

Under the newly drafted rules, to qualify as a SRI fund, an investment company must adopt one or more sustainability principles or ESG factors as its key investment focus, along with reflecting such focus in its investment strategy in its registration statement.

To qualify as an SRI fund, an investment company must have at least 70 percent of its Net Asset Value (NAV) allocated to ESG investments, and their name must reflect the sustainability set out in their investment objectives.

Investment companies must be able to explain to the regulator how the proposed name of the SRI fund is proportionate to its features and ensure that it will “neither mislead investors as to the role of ESG in its overall investment objective and strategy nor over-emphasize or overstate the SRI fund’s ESG features.”

In terms of marketing materials, only SRI funds can use the term “ESG”, “sustainability” or other words that are similar on their sales and marketing materials. Making false statements or using these terms without authorisation can result in daily monetary penalties.

The proposed rules state that SRI funds may consider globally or nationally accepted ESG or sustainability principles, such as the United Nation’s Sustainable Development Goals or the Global Compact Principles.

The SEC also lays out requirements for SRI funds to go through regular assessment and monitoring to ensure that they have achieved their intended ESG focus. An Independent Oversight Entity will supervise the transactions and performances of the fund managers to ensure that compliance with the disclosures made in the prospectus are in line.  

The proposed rules, available here, are open for comment until February 2nd, 2022.