MANILA, Philippines — The In the newly issued memorandum circular, the SEC said an investment company seeking to qualify as a sustainable and responsible investment fund must adopt one or more sustainabil-ity principles or considerations or ESG (environment, social and governance) factors in its investment objective.
As part of its investment objective, the expected exposure or minimum asset allocation percentage that is consistent with the SRI Fund’s sustainable investment objective should ac-count for at least two-thirds of its net asset value at all times.
Furthermore, the name of the SRI Fund must accurately and fairly reflect the sustainability or ESG factors set out in its investment objective.
The SEC likewise laid out sustainability principles that may be considered as reasons for the SRI Fund.
These include the United Nations Sustainable Development Goals, which pertain to the 17 sustainable development goals adopted by the UN in 2015, the United Nations Global Com-pact Principles, the Common
Principles for Climate Mitigation Finance Tracking, the Green Bond Principles of the International Capital Market Association, the Climate Bonds Taxonomy of the Climate Bonds initiative and any other nationally or globally acceptable ESG or sustainability.
The SRI Fund will not invest in companies that are in the industries of alcohol, tobacco, gambling and the like.
It will invest in best in class companies or those with higher ESG scores, ESG Integration that incorporates ESG data in the investment selection process, and active ownership, which in-volves engagement with investee companies.
The SEC rules likewise mandate disclosure of key data such as investment focus, asset allocation, investment selection process, reference benchmarks and indices.
Providing false information or disclosures will be slapped with penalties stipulated in the Securities Regulation Code and other applicable rules and regulations.
The SEC issued the rules on SRI as it noted the global trend and continuous growth of sustainable and responsible investing in recent years.
Furthermore, the new rules seek to protect investors from companies engaged in greenwashing and enable them to make better-informed investment decisions.