ASEAN SDG Bond Toolkit: A guide to key principles for investors
To promote sustainable development in ASEAN, the ASEAN Capital Markets Forum (ACMF) has put in place the ASEAN Green, Social and Sustainability Bond Standards, which follow the International Capital Market Association’s (ICMA) Green and Social Bond Principles.
To promote the issuance of bonds that address specific SDGs as part of the regional sustainability agenda, ACMF in 2021 launched the “ASEAN SDG Bond Toolkit: A Practical Guide to Issuing SDG Bonds in ASEAN”, which aims to be a primer for the issuance of SDG bonds in the region.
While recognising that SDG bond markets are nascent and market practices evolving, the toolkit sets out preliminary guidance on the key principles and processes that issuers can adhere to when issuing an SDG bond.
These principles and processes are based on the best available international practices and the experiences of successful examples of SDG bond issuances from ASEAN and other regions, as well as the needs of investors.
ACMF, through the Asian Development Bank (ADB), commissioned the development of an ASEAN SDG bond toolkit as a key market education and capacity-building resource.
The toolkit is part of wider efforts by ACMF to expand the knowledge and understanding of ASEAN market participants on how to issue sustainable finance-themed bonds.
In complementing the ASEAN SDG bond toolkit and to support potential SDG bond issuers and investors, with industry support, the “ASEAN SDG Bond Toolkit Supplements: Legal and Regulatory Aspects for Every ASEAN Member State” were developed and officially launched at the ACMF international conference.
This was hosted by the Securities and Exchange Regulator of Cambodia (SERC) as Chair of the ACMF 2022 with the support of ADB.
A copy of the toolkit supplements can be accessed through: https://www.theacmf.org/initiatives/sustainable-finance/asean-sdg-bond-t....
The toolkit supplements provide regulatory information regarding the requirements for issuing SDG Bonds by corporates and governments, and the regulatory frame-works to be complied with, as well as the incentives for issuing SDG bonds.
For the investor side, the toolkit supplements provide more information if the bond is offered to the public or private investors and on the incentives to invest in SDG bonds.
According to the toolkits supplements, while there are no barriers to issuing SDG bonds, the issuer has to comply with the plain bond issuance regulatory framework and the relevant ASEAN standards, whereby the SDG bonds will be labelled as ASEAN Green, Social or Sustainability Bond.
Since sustainable finance initiatives have been put in place in ASEAN, governments and regulators provide strong support when issuing SDG bonds.
In addition, the Green, Social and Sustainability (GSS) Bonds which also address the SDGs, but may not specifically link to them, have rapidly increase in ASEAN.
Within five years, the total issuance has reached US$31.05 billion, as of December 16, 2022, with green bonds representing 30 percent of total funds raised, while Sustainability and Social bonds represent 64 percent and 6 percent, respectively.
Thailand is the leading country in issuing GSS bonds among the ASEAN 5 with Indonesia, Malaysia, the Philippines and Singapore.
The amount is expected to rapidly increase in the coming years after the launch of the ASEAN Sustainability-Linked Bond Standards and the ASEAN Sustainable and Responsible Fund Standards.
As the Chair of ACMF 2022, and a member of the ACMF, SERC has remained fully supportive in promoting bonds to support the sustainability agenda.
To issue SDG bonds in Cambodia, a corporation that follows the ASEAN Green, Social, Sustainability and Sustainability-Linked Bond Standards, and meets the requirements laid out in the box below can offer both publicly or privately.
SDG bond issuers in Cambodia will also be granted special tax incentives in addition to a 50 percent reduction on income tax for firms that issue a bond amounting to more than 20 percent of total assets or eight billion riel (around $2 million).
There is also a cap on income tax as an incentive for firms that issue a bond for an amount equal to or less than 20 percent of total assets for three years.
Tax debt waivers – for N-3 to N-10 years for enterprises meeting the criteria for listing on the Cambodia Securities Exchange (CSX) Main Board, and for N-2 to N-10 years for small and medium-size enterprises meeting the criteria for listing on the CSX Growth Board – are also available.
Furthermore, international development partners such as ADB can provide technical assistance to entities interested in issuing SDGs or other sustainable-labelled bonds.
The SERC is pleased to connect interested entities with the ADB for further discussion.
Green bonds issued in Cambodia will be labelled as ASEAN Green Bonds, which means ASEAN Standards are followed, ensuring green bonds in the Kingdom can be invested in with confidence.
There are no restrictions to investing in green bonds in Cambodia, and investors are entitled to tax incentives from the government for three years, including a 50 percent reduction in withholding tax and exemptions on capital gains tax.