Taiwan - OTC Buying Center Established A Special Board For Sustainable Development Bonds.

Legal News & Analysis - Asia Pacific - Taiwan - Regulatory & Compliance - Capital Markets

25 August 2021
 

According to the information published by the Securities Over-the-Counter Center of the Republic of China ("OTC"), the current financial market’s actual needs for sustainable bonds (Sustainable Bonds) are considered, and international financial market practices and practices are referenced to establish a new A complete over-the-counter system for perpetual development bonds. The OTC Center announced and implemented the "Key Points of Perpetual Development Bond Operations" on April 29, 2010, and consolidated the "Key Points of Green Bond Operations" and "Sustainable Development". "Key Points of Bond Operations", and newly added social responsibility bond qualification accreditation and related regulations. According to the "Key Points of Perpetual Development Bond Operations", the scope of perpetual development bonds is Green Bond, Social Bond or Sustainability Bond approved by the OTC. The OTC Buying Center officially launched the perpetual development bond special board and the first batch of social responsibility bonds to be listed on the OTC on May 18, 110.
 

According to the "Key Points of Perpetual Development Bond Operations", "Green Bond" refers to the funds raised by the bonds used for green investment projects; "Social Bond" refers to the funds raised by the bonds All funds are used for social benefit investment projects; "Sustainability Bond" means that all funds raised by bonds are used for green investment projects and social benefit investment projects at the same time.

The aforementioned green investment plan refers to those who invest in the following matters and have substantial environmental improvement benefits:

1. Development of renewable energy and energy technology.

2. Energy efficiency improvement and energy conservation.

3. Greenhouse gas reduction.

4. Waste recycling or reuse.

5. Conservation of agricultural and forestry resources.

6. Biodiversity conservation.

7. Pollution prevention and control.

8. Water resources are saved, cleaned or recycled and reused.

9. Other climate change adjustments or those approved by the OTC Buying Center.
 

The green investment plan must not be a fossil fuel power generation project. However, those who meet the technical selection criteria set by the green bond standards established in the international financial market are not limited to this.
 

The aforementioned social benefit investment plan refers to those who invest in the following matters and have substantial social benefits:
 

1. Affordable basic living facilities.

2. Basic service requirements.

3. Affordable housing.

4. Plans to create jobs and reduce or avoid unemployment caused by social and economic crises.

5. Food security and sustainable food systems.

6. Socio-economic development and rights protection.

7. Other approved by the OTC Buying Center.
 

The types of securities that can be eligible to apply for perpetual development bonds are limited to fixed-income securities that do not contain equity, such as 1. Ordinary corporate bonds 2. Financial bonds 3. International bonds 4. New Taiwan dollar-denominated foreign ordinary bonds 5 . Beneficial securities or asset-based securities, and 6. Islamic fixed-income securities.
 

The issuer shall formulate an investment plan in accordance with the required content. The investment plan shall be issued by the certification body according to the types of perpetual development bond qualifications that the issuer has applied for, and issued in compliance with the "Key Points of Perpetual Development Bond Operations" or the international financial market Evaluation opinions or certification reports of conventional green bonds, social responsibility bonds or sustainable development bond principles. For green bond investment plans, there are exceptions for external evaluation or certification, that is, state-owned enterprises with energy supply expertise and meeting specific requirements may issue their own evaluation opinions in accordance with the green bond principles of international financial market practices.
 

Furthermore, the issuer should also disclose the content of the investment plan in the prospectus. In addition, the issuer shall, during the duration of the perpetual development bond or the use period of the raised funds, and within the prescribed time limit, make an announcement on the use of funds in the Internet information reporting system designated by the OTC. The issuer shall also issue an evaluation opinion or a certification report on whether the use of funds conforms to the investment plan by the certification body within the prescribed time limit each year.
 


 

For further information, please contact:  

 

Zhou Zhiwen, Lee Tsai & Partners

[email protected]
 

[1] The author is a practising lawyer of Liz International Technology Law Firm, but the content of this article is a personal opinion and does not represent the firm’s position.