A Brief Introduction to the Newly-Promulgated Operational Directions for Sustainability Bonds

12/30/2020

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The Taipei Exchange (the "TPEx") promulgated and implemented the Operational Directions for Sustainability Bonds (these "Directions") by making an announcement (Ref. No.: Zheng-Gui-Zhai-Zi-10900649891) on October 6, 2020. Below is a brief introduction to these Directions:

1.      Introduction

      These Directions are stipulated by reference to the international financial practice and the Operational Directions for Green Bonds of the Taipei Exchange (the "Green Bonds Directions") in view of the actual needs of the current financial markets for sustainability bonds ("Sustainability Bonds"), for the purposes of developing sustainable finance, assisting enterprises in investing in the projects meeting environmental, social and governance criteria, and cooperating with the competent authority in promoting various policies.

2.     Definition of Sustainability Bonds

      The Sustainability Bond is a financial instrument whereby the issuer applies all of the proceeds from the bond issuance to green investment plans, social investment plans, or financing (and re-financing) relating thereto; in addition, the issuer shall obtain the accreditation certificate of Sustainability Bonds issued by the TPEx for the bonds to be issued by it and such bonds have to be approved by the TPEx for admission of trading in accordance with the requirements of the TPEx (Article 2 of these Directions).

3.    Type of Securities Eligible For being Accredited As Sustainability Bonds (Article 3 of these Directions)

(1)   Straight corporate bonds;

(2)  Financial debentures (including the NTD-denominated bank debentures issued by  a branch of a foreign bank based in Taiwan);

(3)   NTD-denominated foreign straight corporate bonds;

(4)  International bonds (excluding the equity-linked bonds) as defined under the Taipei Exchange Rules Governing Management of Foreign Currency Denominated International Bonds;

(5)  Financial asset beneficiary securities or asset-backed securities issued in accordance with the Financial Asset Securitization Act; and

(6)  Islamic fixed income securities (Sukuk).

4.    Applying for Accreditation Certificate of Sustainability Bonds

      An issuer wishing to apply for the accreditation certificate of Sustainability Bonds shall apply to the TPEx by submitting the following required documents (Articles 6, 7 and 9 of these Directions):

(1)  An application form for accreditation of Sustainability Bonds;

(2)  An investment proposal for the Sustainability Bonds;

(3)  An assessment opinion or certification report issued by a domestic or foreign certification body stating that such investment proposal meets the principles set out in these Directions or international financial market practices in relation to Sustainability Bonds;

(4)  The supporting documentary proving that such certification body has the professional capability and experience of issuing such opinion or certification; and

(5)   In the case of an issuance of Sukuk, a statement from the Sukuk obligor undertaking to perform all report obligations pursuant to these Directions.

5.    Scope of Use of Proceeds from Sustainability Bonds and Categories of Green Investment Plans and Social Investment Plans

(1)    Proceeds from Sustainability Bonds must be exclusively applied to the following (Article 4 of these Directions):

A.     Expenditures on green/social investment plans for green and/or social project as applied for;

B.     Repayment of debts incurred by such green/social investment plans; and

C.     Financing or re-financing to such green/social investment plans (applicable to, for example, the cases where (i) the bond issuer is a domestic or foreign financial institution or (ii) the obligor of Sukuk issuance which is a financial institution).

(2)  One or more categories of green investment plans below may be selected in the application for accreditation (Article 5 of the Green Bonds Directions):

A.     Development of renewable energy and energy technology;

B.     Improvement of energy efficiency and energy conservation;

C.     Reduction in greenhouse gas emissions;

D.     Waste recycling or reuse;

E.      Conservation of agricultural and forestry resources;

F.      Biodiversity conservation;

G.     Pollution prevention and control;

H.    Conservation, purification, or reclamation, recycling, and reuse of water resources; or

I.       Adaptation to climate change or other categories approved by the TPEx.

(3)  One or more categories of social investment plans below may be selected in the application for accreditation (Article 5 of these Directions):

A.     Affordable basic infrastructure;

B.     Access to essential services;

C.     Affordable housing;

D.    Employment generation, and programs designed to prevent or alleviate unemployment stemming from socioeconomic crises, including through the provision of SME financing and microfinance;

E.      Food security and sustainable food systems;

F.      Socioeconomic development and rights protection; or

G.     Other categories approved by the TPEx.

6.    Requirements of Information Disclosure of Sustainability Bonds (Articles 10 and 11 of these Directions)

(1)    Information disclosure in the offering documents: the issuer shall disclose the investment proposal for the Sustainability Bonds in the prospectus (in the case of an issuance of a financial debenture, such proposal shall be disclosed in its issuance terms);

(2)    Information disclosure before the issuance: before issuing the Sustainability Bonds, the issuer shall upload the investment proposal and the assessment opinion or certification report for the Sustainability Bonds on the website of the reporting system designated by the TPEx (i.e., the Market Observation Post System, "MOPS"); and

(3)    Information disclosure after the issuance: during the live term of the bonds, the issuer shall disclose the use of the proceeds from the fundraising on MOPS, within 30 days from the date of publication of its annual financial report; provided, however, that the issuer with justifiable reasons may apply to the TPEx for conducting the annual disclosure of such use on a date designated by itself.  For the purpose of reporting the use of the proceeds, the issuer shall further upload the assessment opinion or certification report certified by a certification body stating whether such use meets the investment proposal to MOPS.