Adoption of the ASEAN Sustainable and Responsible Fund Standards by the Securities and Exchange Commission

The Securities and Exchange Commission (“SEC”) issued its Memorandum Circular No. 4, series of 2023 (“MC”) on 13 April 2023, adopting the ASEAN sustainable and responsible fund standards (“SRFS”) which is intended to provide the minimum disclosure and reporting requirements that can be consistently applied to Collective Investment Schemes (“CIS”) seeking to qualify under the ASEAN SRFS. The MC was issued in consideration of the rise of CIS with an environmental, social, and governance (“ESG”) investment focus and the need for a comparable, uniform, and transparent disclosure of information to mitigate the risk of greenwashing.

The said rules shall apply to Investment Companies, including sub-funds of umbrella funds, that seek to qualify under the ASEAN SRFS and want to either offer locally or on a cross-border basis under the ASEAN CIS Framework. The rules also apply to CIS Operators and Foreign sustainable and responsible funds (“SRF”) that seek to offer in the Philippines under the ASEAN CIS Framework.

The MC also provides for rules regarding the qualification and recognition of Investment Companies and Foreign SRFs in the Philippines.

Investment Companies

An Investment Company, including any sub-fund of an umbrella fund, may qualify as an ASEAN SRF and make offers locally upon satisfactorily showing its registration as a licensed Investment Company and its authority to issue shares and/or units of participation under the Investment Company Act and the Securities Regulation Code, and their respective Implementing Rules and Regulations. Further, it must also be compliant with SEC MC No. 11, Series of 2022 or the rules on Sustainable and Responsible Investment Funds, and the ASEAN SRFS.

An application to the SEC for qualification as an ASEAN SRF may be made by any Investment Company through submission of a duly notarized and completed SEC ASEAN SRF Form (“Annex B Form”) signed by at least the majority of the Board of Directors of the Investment Company and the fund manager. The application shall be subject to payment of a fee in the amount of PHP10,000.00 plus a 1% Legal Research Fee (“LRF”).

Additionally, the provisions of SEC MC No. 9, Series of 2021 or the Rules on Authorization of an Investment Company as a Qualifying CIS and Recognition of a Foreign CIS under the ASEAN CIS Framework (“SEC MC 9”) must also be complied with if an Investment Company, or any sub-fund under an umbrella fund, that has been qualified or is applying to qualify as an ASEAN SRF seeks to offer its shares on a cross-border basis under the ASEAN CIS Framework.

Foreign Collective Investment Schemes

To be recognized in the Philippines, Foreign SRFs and CIS Operators must demonstrate compliance with SEC MC 9, and any amendments thereto, with respect to the approval and recognition of Foreign CIS to be offered in the country. Apart from the duly accomplished Annex B Form, the Foreign SRF/CIS Operator must submit a Standard Letter issued by its securities regulator as proof that it has qualified as an ASEAN SRF. The Foreign SRF/CIS Operator shall be subject to an application fee of PHP80,000.00 plus 1% LRF.

The Foreign SRF/CIS Operator must also submit to the SEC an explanation as to how its name is proportionate to the ESG features of the Foreign SRF as a whole and that it will neither mislead investors as to the role and extent of ESG in its overall investment objective and strategy, nor overemphasize or overstate the Foreign SRF’s ESG features. Further, the following disclosure requirements must be incorporated in their prospectus:

• Notification to the public on its qualification as an ASEAN SRF;
• Asset allocation;
• Sustainable investment strategy;
• Sustainable investment strategy-related risks;
• Policies and procedures on inconsistency with sustainable investment objective; and
• Any other information.

For more information regarding the ASEAN SRFS, it can be accessed as an attachment here.