ASEAN Sustainability-Linked Bond Standards Disclosure Checklist and FAQs

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Published:
Manila Bulletin, 6 April 2023
Philippine Star, 6 April 2023
Filed with UP Law Center: 5 April 2023

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ASEAN SLBS Guidelines ANNEX
ASEAN SUSTAINABILITY-LINKED BONDS DISCLOSURE CHECKLIST1 As there are a number of disclosure requirements specified throughout the ASEAN Sustainability-Linked Bond Standards and the ASEAN SLBS Guidelines, this disclosure checklist of recommended or necessary pre￾issuance and post-issuance disclosures is provided for ease of reference. DISCLOSURE CHECKLIST A. Pre-Issuance Type of Information Reference in ASEAN SLBS Guidelines Recommended vs Necessary Location2 Selection of KPIs Historical externally verified KPI values covering at least the previous 3 years, in situations where the KPIs have not been previously disclosed
Section 8 (F) Recommended Pre-issuance
documents
(framework, investor presentation, external review, website) Alignment of selected KPIs with the Sustainable Development Goals (SDGs)
Section 8 Recommended
The rationale and process according to which the KPIs have been selected and how the KPIs fit into the Issuer’s sustainability strategy
Section 10 (A) Necessary
A clear definition of the KPI(s) and include:
a) the applicable scope or perimeter; and b) the calculation methodology
Section 10 (B) Necessary

1 This checklist is not exhaustive and does not preclude any mandatory reporting obligation required by the Commission, or market rules, notably in case of change of bonds’ characteristic. 2 All disclosures must be made publicly accessible from a website designated by the Issuer throughout the tenure of the ASEAN Sustainability-Linked Bonds.

ASEAN SLBS Guidelines ANNEX | Page 2 of 6
Type of Information
Reference in
ASEAN SLBS
Guidelines
Recommended vs Necessary Location2
Calibration of
SPTs
Strategic information that may decisively impact the achievement of the SPTs
Section 11 (B) Recommended Pre-issuance
documents
(framework, investor presentation, external review, website) Description and definition of SPTs Section 14 (A) Necessary Motivation for the outlined SPTs (i.e. ambition level and consistency with Issuer’s overall strategic planning)
Section 14 (B) Necessary
Relevant benchmarking approaches
Section 14 (C) Necessary
Timelines for the target achievement, including the target observation date(s)/period(s), the trigger event(s) and the frequency of SPTs
Section 14 (D) Necessary
Verified baseline or reference point selected for improvement of KPIs as well as the rationale for that baseline or reference point to be used (including date/period), where relevant
Section 14 (E) Necessary
Situations in which recalculations or pro-forma adjustments of baselines will take place, where relevant
Section 14 (F) Necessary
Where possible and taking competition and confidentiality considerations into account, how the issuers intend to reach such SPTs i.e. through highlighting the key levers/type of actions that are expected to drive the performance towards the SPTs as well as their expected respective contribution, in quantitative terms wherever possible
Section 14 (G) Necessary
Any other key factors beyond the
Issuer’s direct control that may
Section 14 (H) Necessary

ASEAN SLBS Guidelines ANNEX | Page 3 of 6
Type of Information
Reference in
ASEAN SLBS
Guidelines
Recommended vs Necessary Location2 affect the achievement of the SPTs Issuers are encouraged to position the information above within the context of the Issuer’s overarching objectives, strategy, policy and/or processes relating to ESG.
Section 14 Recommended
Bond
Characteristics
The potential variation of the
ASEAN Sustainability-Linked
Bond’s financial and/or structural characteristics
Section 17 (A) Necessary Pre-issuance
documents
(framework, investor presentation, external review, website); and Bond documentation3 (e.g. by means of prospectus, prospectus supplement, offering circular, offering memorandum, pricing supplement, etc.) Any fallback mechanisms in case the SPTs cannot be calculated or observed in a satisfactory manner
Section 17 (B) Necessary
Language to take into consideration potential exceptional events (such as significant change in perimeters through material M&A activities) or extreme events, including drastic changes in the regulatory environment that could substantially impact the calculation of the KPI, the restatement of the SPT, and/or proforma adjustments of baselines or KPI scope
Section 17 Recommended
Commitment on disclosure of reporting obligations as set out in the ASEAN SLBS
Section 20
and Section 21
Recommended Pre-issuance documents
(framework,

3
Issuance-specific information (e.g. detailed description of the potential variation of the ASEAN Sustainability-Linked Bond’s financial and/or structural characteristics) may be set out in the Issuer’s bond documentation.

ASEAN SLBS Guidelines ANNEX | Page 4 of 6
Type of Information
Reference in
ASEAN SLBS
Guidelines
Recommended vs Necessary Location2
Reporting
Commitments4
Timeline in which reporting on the ASEAN Sustainability-Linked Bonds will be made available
Section 22 Recommended investor
presentation, external review, website)
Verification
Commitments5
Commitment on verification obligations as set out in the ASEAN SLBS
Section 23 and
Section 24
Recommended Pre-issuance documents
(framework, investor presentation, external review, website) Timeline in which the verification assurance report on the ASEAN Sustainability-Linked Bonds will be made available
Section 26 Recommended
External
Review
Publication of a pre-issuance external review, such as a second party opinion to confirm the alignment of the ASEAN Sustainability-Linked Bond with the five core components of the ASEAN SLBS
Section 27 and
Section 30
Necessary External review report
External review provider’s credentials & expertise, and scope of review
Section 29 Necessary

4 Whilst not part of the ASEAN Sustainability-Linked Bond Standards and the ASEAN SLBS Guidelines, “Reporting Commitments” are best practice disclosures that Issuers are encouraged to incorporate in the relevant pre-issuance documentation. 5 Whilst not part of the ASEAN Sustainability-Linked Bond Standards and the ASEAN SLBS Guidelines, “Verification Commitments” are best practice disclosures that Issuers are encouraged to incorporate in the relevant pre-issuance documentation.

ASEAN SLBS Guidelines ANNEX | Page 5 of 6
B. Post-Issuance
Type of Information
Reference in
ASEAN SLBS
Guidelines
Recommended vs Necessary Location2
Bond characteristics
In case of any material change to perimeter/KPI methodology/SPT(s), clearly communicate the rationale and/or restatement optionality, or set out a restatement policy
Section 18 Necessary Bond
documentation6
& post-issuance documents (e.g. annual report, sustainability report, external reviews, website) Reporting Up-to-date information on the performance of the selected KPI(s), including baselines where relevant
Section 20 (A) Necessary Post-issuance
documents (e.g. annual report, sustainability report, external reviews, website) A verification assurance report which includes an assessment on the Issuer’s performance against the SPT(s) as well as its related impact and timing of such impact, on the bond’s financial and/or structural characteristics
Section 20 (B) Necessary
Any information enabling investors to monitor the level of ambition of the SPTs
Section 20 (C) Necessary
A qualitative or quantitative explanation of the contribution of the main factors, including M&A activities, behind the evolution of the performance/KPI
Section 21 (A) Recommended
An illustration of the positive sustainability impacts of the performance improvement
Section 21 (B) Recommended

6 KPI(s) and SPT(s) will be fixed in the legal terms and conditions as set out in the bond documentation of an ASEAN Sustainability Linked Bond at the point of issuance. Therefore, any material changes to the KPI(s) and SPT(s) in the bond documentation would be subject to any relevant laws and regulations.

ASEAN SLBS Guidelines ANNEX | Page 6 of 6
Type of Information
Reference in
ASEAN SLBS
Guidelines
Recommended vs Necessary Location2
Verification Publication of a verification assurance report - independent and external verification of the Issuer’s performance level against each SPT for each KPI by a qualified external reviewer with relevant expertise
Section 23 and
Section 26
Necessary Verification assurance report
External review provider’s credentials & expertise, and scope of verification
Section 25 Necessary
External
Review
Assessment of any material changes to perimeter/KPI methodology/SPT(s) calibration, where applicable7
Section 18 (B) Necessary External review
report
OTHER DISCLOSURES8
Pre￾Issuance

• Rationale for ASEAN Sustainability-Linked Bond issuance & consistency with Issuer’s
  overall sustainability and business strategy
• Statement on alignment with ASEAN SLBS’ five core components
  Post￾Issuance
• Reports and ex-post external review publication dates
• Identification of the bonds: ISIN, amounts, currency, maturity dates and relative KPI(s) &
  SPT(s)
• Scope of reporting (bond-by-bond, bond programme)
• Adherence to specific standards or regulations

7 The external review provider’s credentials and expertise, and scope of review conducted must be set out in the external review report. 8 Whilst not part of the ASEAN Sustainability-Linked Bond Standards and the ASEAN SLBS Guidelines, “Other Disclosures” are best practice disclosures that issuers are encouraged to incorporate in the relevant pre-issuance and post-issuance documentation respectively.

ASEAN SUSTAINABILITY-LINKED BOND STANDARDS FAQS I Fundamentals & Definitions 1-1 What is a SLB? Sustainability-linked bonds (“SLBs”) are any type of bond instrument for which the financial and/or structural characteristics (i.e., coupon, maturity, repayment amount) can vary depending on whether the issuer achieves predefined Sustainability / Environmental and/or Social and/or Governance (ESG) objectives within a predefined timeline. Proceeds from issuance of SLBs are not ring-fenced to green or sustainable purposes (unlike “use of proceeds” green bonds or sustainable bonds) and may be used for general corporate purposes or other purposes. 1-2 What is the difference between green bonds, sustainability-linked bonds, transition bonds, ESG bonds, etc.? SLBs are intended to be used for the issuer’s general purposes but incorporate measurable forward￾looking sustainability key performance indicators (KPIs) and sustainability performance targets (SPTs) into the financial and/or structural characteristics of bonds. Regardless, in select cases, issuers may choose to combine green/ sustainable use-of-proceeds approach with the SLBs. Transition bonds can be either green bonds or sustainability-linked bonds that are issued by those looking to align their financing strategy to their climate transition strategy and decarbonization trajectory. 1-3 What is the interplay of “use-of-proceeds” and “sustainability-linked” bonds? Can they be combined if need be? It is possible to combine a “use of proceeds” approach with a sustainability-linked bond approach, if an issuer chooses to earmark the proceeds of theirsustainability-linked bond to specific projects, and where these are eligible green and/or social projects, by aligning their bonds simultaneously with all the core components of the ASEAN Green Bond Standards/ ASEAN Social Bond Standards and the ASEAN Sustainability-Linked Bond Standards. 1-4 What is the target investor base for sustainability-linked bonds? Sustainability-linked bonds are suitable for all investors and are particularly relevant for fixed income funds with a responsible investment/ESG strategy, notably ESG integration, best in class, ESG tilts and thematic approaches. Certain dedicated green/social/sustainability bond funds may also consider sustainability-linked bonds that reference relevant KPIs and SPTs even when these are not combined with a “use of proceeds” approach.

2 ASEAN Sustainability-Linked Bond Standards FAQs II Issuers 2-1 Who can issue a sustainability-linked bond? Subject to any applicable law or regulation, all types of issuers in the debt capital markets can issue a sustainability-linked bond as long as it is aligned with the five core components of the ASEAN SLBS. 2-2 Can a Sustainability-Linked Bond be issued by an issuer at the start of their transition journey, i.e., issuers not yet able to claim alignment with the Paris Agreement or similar relevant benchmarks on the theme the KPIs address, but taking ambitious steps in that direction? Yes. SLBs are accessible to all issuers, regardless of sector, geography or level of sustainability, provided they deliver alignment with the key principles, i.e. selection of KPIs reflecting issues which are ‘core’, material, and relevant (even if the issuer only recently started to measure them), and the associated targets are ambitious. This instrument is designed to support issuers’ journeys, provided that the aim, the path and the pace are appropriate. It is important to note that many investors take into consideration the quality of the issuer’s overarching sustainability and may apply a variety of exclusion criteria and minimum requirements with respect to ESG governance, management and performance. 2-3 Does the issuer have to write a separate framework and/or information template document, or is a description of the key details in the legal documentation enough? Issuers are encouraged, where feasible, to publish a framework and/or information template, which would be separate from the legal documentation, to cover their alignment with all core components, as well as with additional recommendations. For sustainability-linked bonds, as key sustainability features impact the bond’s characteristics, many core aspects will need to be embedded in the bond’s terms and conditions as well as other relevant sections of the prospectus. Further “non-contractual” information related to the SLB’s structure and the issuer’s sustainability strategy can be disclosed in a variety of ways, including a framework, investor presentation, external review, sustainability report – subject of course to security regulation relevant to the target market of the offering.

3 ASEAN Sustainability-Linked Bond Standards FAQs III Selection of Key Performance Indicators (KPIs) and Calibration of Sustainability Performance Targets (SPTs) 3-1 What do the ASEAN SLBS mean by “material” KPIs? The notion of materiality is multi-faceted. It can be understood from a few different vantage points:

• an economic lens or a strategic planning exposure (i.e. the E and/or S and/or G issues
  captured by the chosen KPIs are the ones that have the greatest impact on the relevant activity, strategic orientation and the issuer’s operational and potentially financial performance. KPI(s) should thereby address the most important E and/or S and/or G challenges of the industry sector, and should be consistent with the issuer’s overarching sustainability strategy, referencing a core, significant and relevant business activity, for which the outcomes are predominantly influenced by the issuers’ decisions and management controls); and /or
• a sustainability standpoint, where the ESG issues captured by the KPIs have the highest
  impact on the environment and/or society, whether to external stakeholders or internally). Materiality maps such as SASB1 , and as reflected in the sector materiality matrix ICMA’sIllustrative KPIs Registry2 , can provide helpful guidance for issuers. Optimally, the materiality that SLBs are intended to addressis the confluence of these standpoints, with scale/magnitude being the relevant factor. A determination of materiality may ideally take into account physical metrics (inputs or outputs throughout the value chain), e.g. % of total footprint, % of employees, % of total tonnes of products, % of volume of production or other relevant metrics, and, when appropriate, financial metrics i.e. as % of turnover/EBITDA or other relevant metrics. It can be assessed using standard calculation and accounting methods (e.g., compound annual growth rate, changes in the share of the business or a relevant financial indicator, such as capacity or energy mix for utilities). Multiple KPIs may be relevant, even for a single tranche, especially where a ‘basket’ of KPIs is needed to holistically encompass a material sustainability theme, or in order to appropriately capture all the materiality dimensions of the issuer. 3-2 What are the benchmarks, standards or frameworks that can be used to identify relevant and material KPIs? What parameters should be taken into account to consider whether SPTs comply with a "material improvement"? A relevant KPI enables to assess and benchmark issuer’s environmental and social impact, and/or the impact of environmental and social factors on its financials. SLB issuers may reference or take inspiration from regulatory standards or taxonomies in the choice of relevant KPIs. Similarly,

1 The International Sustainability Standards Board (ISSB) is developing sustainability-related disclosure standards that will build on existing reporting initiatives such as SASB. https://www.sasb.org/standards/materiality-map/ 2 https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/sustainability-linked-bond-principles-slbp/

4 ASEAN Sustainability-Linked Bond Standards FAQs reference to goals and objectives set in international agreements, such as the Paris Agreement (Philippines’ Nationally Determined Contributions and the 1.5°C or 2°C temperature rise objective) or the 2030 Agenda on Sustainable Development (Sustainable Development Goals), can prove useful. Issuers may also refer to ICMA’s Illustrative KPIs Registry which includes high-level recommendations as well as illustrative examples for the selection of KPIs for SLBs. Other examples of external guidance and/or tools that issuers may reference include: Global Reporting Initiative’s Guidelines (GRI), Sustainability Accounting Standards Board (SASB), TCFD, International Integrated Reporting Council’s Framework, Accountability’s Materiality Framework, Science-Based Target Initiative (SBTi), Paris Agreement Climate Transition Assessment (PACTA) Tool, GHG Protocol, and Partnership for Carbon Accounting Financials (PCAF). Further guidance is available in the Illustrative KPIs Registry available on ICMA’s website including a suggested sustainability ‘materiality matrix’ by sector, establishment of a distinction between core and secondary KPIs by sector, and an indicative list of global benchmark and sector initiatives for suggested KPIs. 3-3 What level of granularity is expected with regards to the calculation methodologies of the SPT? Calculation methodologies must be clear and understandable to all investors. The different data points should be highlighted to explain how the KPI is built and calculated. Referring to external recognized reporting standards (such as the Global Reporting Initiative, GHG Protocol, EU ETS, etc.) may be sufficient when a clear calculation methodology is associated to such standard. 3-4 What governance process should be established by the issuer to monitor the achievement of SPTs? The issuer should not only select the relevant KPIs and related SPTs but also ensure proper monitoring, disclosure and verification. In particular, issuers of SLBs should publish, and keep readily available and easily accessible:

• up-to-date information on the performance of the selected KPI(s), including baselines
  where relevant;
• a verification assurance report relative to the SPT outlining the performance against the
  SPTs and the related imp act, and timing of such impact, on the bond’s financial and/or structural characteristics; and
• any information enabling investors to understand the time horizon of an SPT in relation to
  the bond tenor and monitor the level of ambition of the SPTs (e.g., any update in the issuers sustainability strategy or on the related KPI/ESG governance, and more generally any information relevant to the analysis of the KPIs and SPTs). This reporting should be published regularly, at least annually, and in any case for any date/period relevant for assessing the SPT performance (“trigger event”) leading to a potential adjustment of the SLB’s financial and/or structural characteristics.

5 ASEAN Sustainability-Linked Bond Standards FAQs Some analysts recommend that the trigger event be set halfway or midpoint of the bond term. This allows sufficient time for any incentives or penalties, such as higher repayment amount of the principal, to take effect over a longer period and therefore become material for the issuer to focus on achieving the SPTs. As a reminder, since a number of transparency measures are specified throughout the ASEAN SLBS and for the sake of clarity, a checklist of recommended or necessary pre- and post-issuance disclosures is provided in the Disclosure Checklist. To ensure a smooth governance process, some issuers may find it convenient to make the verification of SPTs achievement relative to KPIs part of the preparation of the integrated annual report or sustainability report, in particular if the external verification is provided by the statutory auditor. 3-5 How should differences in the sector, geography, governing laws and environmental policies be reflected when defining the ambition of SPTs? The issuer should select KPIs and SPTs in relation to the specific sectors and local context with ambitious SPTs based on a combination of benchmarking approaches, such as historical and externally verified values, those selected by the issuer’s peers, and industry or sector standards, incorporating recognized Best-Available-Technologies or other proxies in the sector/industry. Targets should be set, at a minimum, to be in line with national/regional/international targets (e.g. Philippines’ Nationally Determined Contributions, Paris Agreement, 2030 Agenda on SDGs, etc.), and, when possible, shall aim to go beyond such levels. For example, climate-related targets should be set in line with ‘science-based’ scenarios. It is understood that sustainability priorities are likely to vary depending on the economic, social and political context of different geographies in which issuers are domiciled or where they have the largest proportion of their activities situated. For example, environmental SPTs that may be regarded as modest in ambition in developed economies, could be highly ambitious in regions where the decarbonization effort is less advanced. Similarly, differences in social factors including demographics, workforce participation and gender equality where issuer activities are undertaken may mean that what is regarded as an ambitious target in one region may not be accepted as ambitious in another. The ASEAN SLBS invite issuers to clearly communicate to investors the references to the benchmarks selected, and how the specificities of a given sector and/or local context have been identified and addressed. 3-6 Is it possible to use ranges, dynamic targets, and /or benchmarks (as opposed to all being “set” before the issuance of the bond) including to allow a reasonable margin of error? The SLBP state that SPTs should “where possible be compared to a benchmark or an external reference;” and “be determined on a
predefined timeline, set before (or concurrently with) the issuance of the bond.” While such SPTs will be the most transparent and easiest to calculate results of, some issuers may elect dynamic targets that could change over the life of the bond. Examples may include, but are not limited to, a “Most Favored Nation” clause, or remaining in the top

6 ASEAN Sustainability-Linked Bond Standards FAQs [quartile] of an industry or peer group with respect to a particular KPI. Issuers should keep in mind that in such situations, the calculation and evaluation of a KPI against an SPT must remain transparent, specific, and replicable over time. Language which leaves room for interpretation – for example as to whether or not to apply a most favored nation clause or to modify a peer group (for example due to M&A activity of peers) is discouraged. The scale of any range should be clearly defined, with any margin of error being commensurate. 3-7 Can an Issuer amend how it calculates a KPI or change an SPT prior to the maturity of an SLB? KPI(s) and SPT(s) will be fixed in the legal terms and conditions of an SLB at the point of issuance. Therefore, to the extent there is to be any discretion as to how a KPI is calculated or potential for an issuer to change an SPT prior to maturity, it must be explicitly contemplated in the legal documentation. KPIs and SPTs should always be precise, clear and unambiguous to avoid future disagreement as to whether a SPT has been met. 3-8 Can a third-party ESG rating serve as KPI for a SLB? In principle, an issuer’s ESG rating as provided by an external sustainability/ESG rating agency may serve as KPI for a SLB. Issuers should clarify if they are using either an ESG rating as a whole, or specific E and/or S and/or G-related components of the overall rating as their target KPIs. Given diverging and evolving rating methodologies and rating scales, as well as other characteristics (e.g. subjectivity), where an ESG rating is not accompanied by other KPIs, issuers are expected to explain why an ESG rating may be the best indicator to reflect their core business ESG challenges, and disclose the kind of rating (solicited vs unsolicited rating). In addition, issuers should be aware that they hold no direct influence on the evolution of their ESG ratings and, in choosing them as KPIs, they risk not reaching any set SPT(s). There may also be regulatory or licensing constraints to using ESG ratings as KPIs that the issuer should consider. 3-9 Can the KPIs be at project level or do they need to be at corporate level? Yes, the KPIs can be at the project level provided that such a KPI fulfils the first and second principles of the ASEAN SLBS in terms of KPI selection and calibration of the SPTs. In particular, this means that the KPIs should still be “relevant, core and material to the issuer’s overall business, and of high strategic significance to the issuer’s current and/ or future operations”, which may be less clearly defined for KPIs that are solely project-related. 3-10 When the issuer is an issuing subsidiary within a larger group,should it use its own KPI or can it use group KPIs? KPIs could be KPIs related to the group or set independently of the issuing entity, as long as they are relevant, core and material to the issuer. In addition, it is also recommended that the
issuing subsidiary’s KPI(s) be consistent with the group’s overarching sustainability strategy.

7 ASEAN Sustainability-Linked Bond Standards FAQs 3-11 How does an issuer map the KPIs to the UN SDGs? There are initiatives and resources in the market that may be of help to issuers when mapping KPIs to the SDGs, including, for example:

• UNDP’s impact practice Standards for SDG bond refers to standardized metrics (e.g., GRI,
  SASB, IRIS+) that are linked to specific SDG targets or outcomes and set across the Five Dimensions of Impact developed by the Impact Management Project,
• GRI, UN GC and WBCSD’s SDG Compassincludes inventories of business tools and indicators
  mapped to the SDGs,
• PIMCO’s Best Practice Guidance for Sustainable Bond Issuance lists examples of initiatives
  that suggest targets at the corporate issuer level that may be mapped to the SDGs, e.g., CEO Water Mandate, RE100, EV100, Science-based target initiative or the New Plastic Economy Global Commitment. It is important to note that KPI-alignment with the SDGs does not automatically ensure alignment with the ASEAN SLBS. 3-12 Can an issuer use multiple KPIs and SPTs within a single offering? Multiple KPIs may be relevant, even for a single offering, especially where there are no dominant sustainability issues for a given issuer or sector, in order to appropriately capture the sustainability performance of the borrower. Issuers should ensure that where multiple SPTs are used for the same KPI in relation to a single offering, this does not appear to reduce the issuer’s commitment to high performance on the KPIs chosen. 3-13 How should the issuer deal with M&A activities with regards to the existing KPIs/SPTs defined at the bond issue date? How should an issuer disclose material changes to its operations (i.e., M&A activity) and corresponding adjustment to SPTs? It is critical to remember that any adjustments to KPIs and SPTs designed to address the impacts of M&A activity must be defined before (or concurrently with) the issuance of an SLB. The methodology for dealing with such M&A activity will be highly customized for each set of KPIs and SPTs; however, the calculation and evaluation of a KPI against an SPT must remain transparent, specific, and replicable over time. M&A activity which impacts KPIs and the probability of achieving SPTs is likely to impact the price at which SLBs trade. As such, disclosure of material changes to operations must be done in accordance with securities disclosure laws applicable to the issuer and the SLB.

8 ASEAN Sustainability-Linked Bond Standards FAQs IV Bond Characteristics 4-1 What kind of 'structural changes' could be involved in a SLB? “Structural changes” refer to any other changes to the financial characteristics of the bond (coupon, maturity, repayment, interest payment date, amount, options, etc.) that would vary depending on whether the selected KPI(s) reach (or not) the predefined SPT(s). While such “structural changes” have so far never been tested on the market and still do not draw consensus of what they can be or how they could be structured, ASEAN recognizes the extreme infancy of this instrument and does not want to hinder innovation by predefining the type of stake for the issuers SLBs introduce. The overarching intention underlying SLBs is the reinforcement of accountability from issuers with regards to their targets through introduction of a tangible stake beyond reputation (“skin in the game”) in the achievement of their strategic sustainability objectives. Therefore, one would expect the changes to the bond characteristics embedded in such product to both involve a meaningful and commensurate impact on the financial and/or structural changes involving trigger event(s) respecting this overarching principle. 4-2 Should there be any connection between the investment required to reach the SPT and the amount of funding raised using an SLB related thereto? No, SLBs do not impose any commitment or disclosure on the investments required to reach the SPT. In some cases, reaching the SPT may require significant investment. In other cases, the issuer may reach the SPT without undertaking large investment. Many investors believe that an ambitious SPT is unlikely to be achieved with “business as usual” activity, which will likely require new investment, and/or organizational change (strategy/operating procedures/divestments etc.). Communicating all such activities required to achieve the SPT is recommended.

9 ASEAN Sustainability-Linked Bond Standards FAQs V Reporting and Verification 5-1 Should the ASEAN SLB's reporting process be aligned on time and in an appropriate manner to the Company’s Management Report? There is no such requirement as part of the ASEAN SLBS. The timing of the annual reporting relative to an ASEAN SLBS issuance or programme is not prescribed, but the issuer would need to disclose it ahead of issuance. However, since KPIs are likely to be part of the issuer’s annual reporting exercise, the coincidence of timelines is totally possible. 5-2 Are there any minimum requirements in terms of an issuer’s ESG performance or exclusions in terms of business activities or practices? No, the ASEAN SLBS do not prescribe a minimal level of ESG performance or consider any exclusions. However, SLBs may be best suited for companies that have integrated their business strategy with their sustainability strategy and therefore are advancing in their ESG journey. Unless issuers choose to combine the ASEAN Green Bond Standards/ ASEAN Social Bond Standards (‘use of proceeds’ format) with the ASEAN SLBS, the proceeds of SLBs are intended to be used for general corporate purposes. As a result, proceeds may be used to finance any kind of business activities that the issuer is pursuing. However, it is up to the issuer to make their case for a credible SLB and overall sustainability/transition strategy. Many investors take into consideration the quality of the issuer’s overall ESG profile. Investors may take into consideration the broader conduct of the issuer in order to evaluate the level of ambition of the chosen KPI(s) as well as to assess the likelihood of the issuer achieving the SPTs. Investors with a focus on sustainability may apply exclusion criteria and minimum requirements with respect to ESG performance. 5-3 External verification of the performance against the SPTs is required under the ASEAN SLBS. How will this affect the legal documentation? It is a requirement of the ASEAN SLBS that external verification of each KPI is made at least once a year and for any date/period relevant for assessing the SPT performance (“trigger event”) that may lead to an adjustment of the bond characteristics. Therefore, it is expected that reference will need to be made in the legal terms and conditions of the bonds setting out the roles of the parties in confirming whether the SPT has been met. By way of example, in bond documentation, where an Issuer or third party makes a determination it is common to include drafting that the determination, in the absence of error, fraud, negligence etc., is binding. The precise drafting would need to be addressed as part of the documentation process prior to issuance of the SLB. It is also likely that parties structuring the transaction will want to include a specific undertaking from the Issuer in the legal terms and conditions to make external verification reports publicly available in line with the requirements of the
Guidelines.

10 ASEAN Sustainability-Linked Bond Standards FAQs 5-4 What type of external reviews are required pre- and post- issuance? Pre-issuance, issuers of ASEAN Sustainability-Linked Bonds are required to obtain external review, such as a second party opinion, to confirm the alignment of the ASEAN Sustainability-Linked Bond with the five core components of the ASEAN SLBS. Post issuance, issuers of ASEAN Sustainability-Linked Bond are required to obtain independent and external verification as part of the reporting commitment of the ASEAN SLBS. Such a verification should be provided at least once a year and also coincide with any trigger event on the bond instrument – i.e., a point in time measurement of the SPT that effects the bond’s characteristics. References:

1. International Capital Markets Association. 2019. Sustainability-Linked Bond Principles Related Questions.
2. International Capital Markets Association. 2022. Sustainability-Linked Bond Principles Related Questions.