Navigating the 2025 SEC Guidelines on the Philippine Green Equity Label

The Philippine Securities and Exchange Commission (SEC) recently issued Memorandum Circular No. 13, Series of 2025, establishing the Philippine Green Equity Label. This development is a landmark in sustainable finance, offering companies a way to distinguish themselves as leaders in environmental, social, and governance (ESG) compliance. For corporations, investors, and stakeholders, understanding these guidelines is essential not only for compliance but also for strategic positioning in a market increasingly driven by sustainability.

As a CPA law firm, we aim to unpack these guidelines in practical terms, outlining compliance requirements, potential benefits, and legal considerations for our clients.

Purpose of the Guidelines

The Green Equity framework seeks to:

• Direct investment toward low-carbon, climate-resilient businesses.

• Provide investors with a credible signal that a company’s shares are environmentally and socially responsible.

• Align Philippine capital markets with global ESG trends and the ASEAN Taxonomy for Sustainable Finance.

  
  

Ultimately, this creates both opportunities and compliance obligations for listed companies.

Key Requirements for Companies

To qualify for the Philippine Green Equity Label, companies must:

1. Revenue Threshold – At least 50% of revenue must come from activities classified as green under the Sustainable Finance Taxonomy.

2. Investment Threshold – At least 50% of capital and operating expenditures must be allocated to green activities.

3. Fossil Fuel Limitation – No more than 5% of revenues may be derived from fossil fuel-related activities.

4. Taxonomy Alignment – Activities must adhere to the Philippine Sustainable Finance Taxonomy Guidelines (SFTG) or the ASEAN Taxonomy.

5. Safeguards – Companies must comply with Do No Significant Harm (DNSH) principles and Minimum Social Safeguards (MSS), ensuring that green projects are not achieved at the expense of other environmental or social objectives.

Application and Disclosure Process

• External Review – Applicants must engage an independent reviewer to verify eligibility. The review report must be made publicly accessible.

• SEC Approval – Companies must formally apply with supporting documents, including audited financials and evidence of compliance with the above thresholds.

• Ongoing Reporting – Annual and triennial assessments are required to maintain the label. Material changes, such as acquisitions or business pivots, must trigger fresh reviews.

• Transparency – All disclosures related to Green Equity, including Key Performance Indicators (KPIs) and alignment updates, must be available on the company’s website or official filings.

Oversight, Penalties, and Legal Risks

The Philippine Stock Exchange (PSE) will oversee compliance, coordinating with the SEC for enforcement. Failure to maintain eligibility may result in:

• Withdrawal of the label and prohibition from marketing shares as Green Equity.

• Penalties under the Securities Regulation Code (SRC), including fines and administrative sanctions.

• Reputational damage, which can affect investor confidence and market valuation.

This underscores the importance of rigorous compliance, accurate reporting, and ongoing monitoring.

Transitional Provisions

During the initial phase, companies may qualify even if not fully aligned with all technical taxonomy details, provided they:

• Substantially contribute to environmental objectives.

• Adhere to DNSH and MSS principles.

• Present clear transition plans toward full alignment.

This flexibility offers companies a window to restructure operations and investments without immediate disqualification.

Why This Matters for Stakeholders

For companies, the label provides a competitive edge in attracting sustainability-focused capital. For investors, it offers a credible benchmark to identify responsible investments. For regulators and the public, it enhances market transparency and accountability.

As ESG becomes a defining factor in capital markets, the Green Equity Label represents both a compliance obligation and a strategic opportunity.

How Our Firm Can Help

Our firm advises corporations on compliance, external review preparation, disclosure obligations, and risk management under the new SEC guidelines. We also provide guidance to investors seeking to interpret Green Equity labels in the context of due diligence and portfolio strategy.

With sustainability now at the forefront of regulation and market behavior, aligning with the 2025 SEC Guidelines is not just about compliance—it is about securing long-term growth and resilience.

Contact us today to learn how we can assist your company in navigating the Philippine Green Equity framework with confidence.