Circular No. 1187: Philippine Sustainable Finance Taxonomy Guidelines

BANGl<O SENTRAL NG PILIPINAS
The Monetary Board. in its Resolution No. 193 dated 14 February 2024. approved the adoption of the Philippine Sustainable Finance Taxonomy Guidelines (SFrGI for banks. The Philippine SFrG was developed under the auspices of the Financial Sector Forum (FSF) following the recommendations in the Philippine Sustainable Finance Roadmap released by the Inter agency Technical Working Group for Sustainable Finance (or the Green Force) in October 2021. OFFICE OF THE GOVERNOR Subject: Philippine Sustainable Finance Taxonomy Guidelines CIRCULAR No. 1187 Series of 2024
Section, . Section 153 of the Manual of Regulations for Banks (MORB). as amended
by Circular Nos. 1/28 dated 26 October 2021. and 1149 dated 23 August 2022. is further amended as follows:
^53 SUSTAINABLE FINANCE FRAMEWORK
Ptscfos"re Requirements. xxx
Phil^., pine Sustainable Finance 7^x@"@my Guidelines fSFT6). The SFTG aligns with the Philippine Sustainable Finance Guiding Principles to advance sustainable finance' in the country. The SFrG serves as a tool to classify whether an economic activity is environmentally and socially sustainable and guides different stakeholders in making informed investment and financing decisions, XXX The SFrG aims to direct. accelerate, and increase capital flows to economic activities that promote sustainability objectives. including reduction of greenhouse gas (GHG) emissions and building climate resilience. It likewise promotes transparency and credibility by minimizing the risk of greenwashing and supports a just transition to a sustainable economy. Banks shall use the SFrG when extending credit. making investment decisions. or designing sustainable financial products and services, among others. In issuing sustainable bonds. banks shall comply with the regulatory requirements articulated in the relevant sustainable bonds standards or guidelines issued by the Securities and EXchange Commission (SEC). While the SEC Guidelines provide lists of eligible green and social project categories. the issuing bank may voluntarily apply the principles under the respective components of the SFTG to assess if such bond issuance is aligned with the Taxonomy. In addition. the considerations for the environmental objectives could provide additional guidance in assessing eligible green projects Ie. g, , in determining substantial contribution to an environmental objective). ' Please refer to the definition under this Section and as adopted by Section 331 Agr/culture, Fisheries. and Rural Development Fibancing. Pagel of 3

Assessment Process, Below are the steps to be undertaken in classifying whether an economic activity is environmentally and socially sustainable, and financing thereofcan be labelled as SFrG-aligned:
a. Determine that the activity to be financed I^ not Ihc/uded in the enumeration of 'Excluded Activity" under the SFTG and I^ compliant with Phil*?pine laws. Unless otherwise specified, an Excluded Activity is riot aligned with the SPrG. However. there are certain instances provided in the SFrG wherein excluded activities may be considered as enablers of climate change mitigation or adaptation objectives. and in turn. may be eligible for financing under the Amber classification. Meanwhile, if the activity is illegal under Philippine laws or is in breach of environmental laws and regulations. the subject activity is considered outside of scope of the SPrG. Selectthe relevantEnvi/oninenta/Of 21^ct/veiEO/of the activity In assessing the primary objective of the activity, the following factors may be considered: (ij activity relevance and strategic alignment; Iii) investors/financial institutions' priority; and Iiii) government and industry guidance. Banks shall refer to the guidance on substantial contribution as well as to the guiding questions for climate change mitigation (EOl) and climate change adaptation IE02) under the SFrG to determine which EO is relevant to the activity being assessed. Assess whether the activity SIIg'inficant{y harms the other EQ. An activity contributing to one EO should not cause significant harm to another EO. Banks shall refer to the general guiding questions for the Do NO Significant Harm IDNSH) to focus assessment on the potential or actual harm to another EO. d. Ifthere ts harm, verify that the same hasbeen reinedlatedor will be reinedfated within the required defined period. If an activity does cause significant harm to another EO. it is possible that it may still be SFrG-aligned, provided remedial measures to transition IRMT) are taken. Any RMT should be fulfilled within a five (5)-year timeframe without independent verification from the assessment date. If the reinediation is longer than five (5) years but riot exceeding ten (10) years, this must be supported by an independent external verification lending credibility to the longer RMT timeframe. The SFrG provides a set of guiding questions and decision trees to support banks' assessments. In addition, entities undertaking the economic activity should comply. at a minimum, with the Philippine social safoguard requirements. After the assessment process. economic activities may be classified as Green. Amber or Red following the definitions under the SF'rG. An activity that falls under the Red classification does riot imply that the activity is unsustainable. Rather. the subject activity does not meet the higher sustainability ambition of the SFrG or pass the DNSH or minimum social safeguards tests. The activity classified as Red may still be eligible for "unlabeled" financing. The SFrG offers a simplified approach for the assessment of micro. small and medium enterprises' (MsMEs) activity for financing. This is to ensure that MsMEs are riot unduly excluded from
participating in sustainable finance. The details of the SFrG are provided in Appendix157. b. c.

Section 2. Observation Period. Banks shall be given until end-December 2024 to
deepen understanding and familiarity in applying the Philippine Sustainable Finance Taxonomy Guidelines (SFTG). Starring 2025, the Bangko Sentral shall collect information related to the use of the SFTG. The foregoing provision shall be incorporated as footnote to Section 153 philjop/ne Sustarhab/e Finance 7;^xonomy Guideffnes)of the MORB.
Section 3. This Circular shall take effect fifteen (15) calendar days following its
publication either in the Official Gazette or in a newspaper of general circulation. February 2024 FOR THE MONETARY BOARD:
14,
ELI M. REMOLONA, JR.
Governor

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App. I. 57
PHILIPPINE
SUSTAINABLE FINANCE
TAXONOMY GUIDELINES
VERSION I, FEBRUARY 2024

Contents
Executive Summary ....................................,..........................................,.................... 3
Glossary ..................................................................................................................,.... 6
I. The Philippine Context for Sustainable Finance .........,..................................... 9
2. The Sustainable Finance Taxonomy Guidelines ................................,............ 1.3
2.1 Definition of Sustainable rina rice ,..,, . . . . . ..., . . . . . . . . .... . . .. .. . . . . . .......,.,.,, . . . . ...... . . . . I3
2.2 Purpose of the Sustainable Finance Taxonomy ..,,,......,......,............. .. ..,.. . 14
2.3 Potential Users of the Philippines Sustainable Finance
Taxonomy G u idelines ..,.,,.,..,...........................................,............................. 15
The S FTG Guiding Principles, ... . ......... . . . . . . .......,.................. ......... . . ....... . ... ... . . 1.7 2.4
2.4. I. Guidance on Setting the SFTG Environmental Objectives. ....,,................,. 9
2.4. Z Sector Coverage of the S FTG .... . ..,...... . ....... . . . . .. . . . . .... . . ...... . . .. . . .,,, .,.,,,,... ....... ... 21.
2.4.2 a Prio rity S ecto rs . . . . . . . . . . . . . , . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . , , , , . . . , . . . , . , . . . , . , , , , . . , . . . . . . . . . . . . . . . . . . . 23
2 .4. 2b Enabl ing S ectors ......,,...........................................,,...........,,,,................,,..,...,. 24
3. Assessment of Activities Under the SI;'TG .........................,......................,....... 26
The Gen eric ap proaCh to assess merit. ...................................,... ., . . . . ... . . . ..... . 26 3.1
3.2 Exclu ded Activities ...................,....,..,,,.........................................,.................. 2 6
3.3 Coinp lia rice with laws ,,....,...............................,,..,,,,,..,..,.,...,,,......................., 27
3.4 The 'traffic light' classification system, .............,................................. . . ...... 28
Choosing an Enviro ninental Objective ... ........ . . . . . . . . . .. . . ...... . ............... ....... . .. 29 3.5
3.5. ,. Guidance on 'substantial' contribution ..................................... ................. 29
3.6 Using the Decision Tree and Guiding Questions to Assess am Activity. 30
3.6. ,. Climate Change Mitigation Decision Tree and
G uiding Quest to ms IE0 I. I , . , . , . . , , . . . . . . . . . . . . . . . . . . . . . . . . . , . , . . . . . . . . . . . . , , . . . , , . , . . . . . . . . . . . . . . . . . . . . . 30
3.6.2 Climate Change Adaptation Decision Tree and
Guiding Qu estions IF0 2 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , , , . . . . . . 32
3.6.3 Assessment of the Essential Criteria of DNSH, RMT and Mss ................ 35
3.6.4 Do NO Significant Harm IDNSHj - Guidance and Guiding Questions. ... 36
3.6.5 Remedial Measures to Transition - Guidance and Guiding Questions. 38
3.6.6 Minimum Social Safeguards - Guidance. ...............,,.,,,.,...................... . ...... 40
3.7 External verification and use of Industry Standards .........................,...., 42
3.8 Assessment o f Expo sures to M SM Es . ............................. . . ................, . . ..... .. . . 43
Appendix I. Non-Exhaustive List of Laws for Minimum Social Safeguards ....... 46
Appendix 2 Compilation of Guiding Questions for EOS and Essential Criteria 48
Appendix 3 Use Cases on Climate Change Mitigation ...............,....................,....... 57

Figures
Figure I: Climate Risk Dimensions and Impact on Financial Markets
Figure 2: Observed Poverty Reduction, GDP Growth and GHG Emissions Growth
Figure 3: NDC Alignment to National Development Plans
Figure 4: Total Philippines GIIG Emissions by Sector1990-2020
Figure 5: Expected Growth of Emissions in the Philippines
Figure 6: Total Final Consumption of Energy by Sector, Philippines 1.990-2020
Figure 7: The EOl. Climate Change Mitigation Decision Tree - EOl. Decision Tree
Assessment for Classification of Activity
Figure a The EOZ Climate Change Adaptation Decision Tree - E02 Decision Tree
Assessment for Classification of Activity
Figure 9: The logic now and decision-tree diagram for assessing essential criteria
(excerpt from Figure 8)
Figure 10: Decision Tree for Assessing MsME Activity
Tables
Table I: Sources of Financing for the LCCR Transition
Table 2: The Philippine Sustainable Finance Guiding Principles
Table 3: Target Users and Potential Uses of the SFTG
Table 4: SFTG Objectives - Existing and Future Objectives
Table 5: Summary of Classification of Activities for SF'TG
Table 6: Choosing an Environmental Objective
Table 7: Guiding Questions for EOl. Climate Change Mitigation -I. A and I. B
Table 8: Guiding Questions for E02 Climate Change Adaptation
Table 9: Guiding details to the decision box in the flow diagram
Table 10: General Guiding Questions for DNSH
Table 11: Environmental Objective Specific Guiding Questions for DNS"
Table 12: Guiding Questions for RMT

Executive Summary
The Philippines is in the Circum-Pacific Belt Ithe "Ring of Fire"j and has high exposure to natural hazards Ityphoons, landslides, floods, droughts, earthquakes, volcanic eruptionSI, strong dependence on a climate-sensitive agricultural sector, and vast coastlines where all major cities and most of the population reside. The Philippines also lies in the world's most cyclone-prone region. The disruptive effects of climate-related disasters have the potential to adversely affect production and the economy more broadly and likewise can be a potent threat to the stability of the Philippine's financial sector. Yet the Philippines has made considerable progress towards realizing its vision of becoming an upper middle-income country by 2040. With strong gross domestic product (GDP) growth and significantly reduced poverty levels, however, greenhouse gas (GHG) emissions have also grown, This may persist if robust climate ambitions and actions are not aligned. The Philippines has set out key policy responses to dealwith the effects of climate change and commits under the Paris Agreement to reducing projected cumulative greenhouse gas emissions by 75 percent from a business-as-usual scenario, of which 2.71. percent is unconditional and 72.29 percent is conditional on international support. While the Philippines' share of global GHG emissions is less than 0.5 percentl as of 2021, it recognizes its international commitments under the Paris Agreement to reduce GHG emissions, and the opportunities of GHG mitigation for sustainable development and co-benefits including pollution prevention. It demonstrates the country's responsibility in addressing common threads as Philippines may be highly vulnerable to the impact of climate change. The case for the more ambitious Nationally Determined Contribution (NDC) is manifested out of the country's climate-related vulnerability and the continued loss and damage from extreme weather events - reaching 4 percent of GDPin 2013 {due to Super Typhoon Haiyan) whilst successive typhoons in October and November 2020 alone resulted in approximately UsD 852 million in losses and damages in agriculture and infrastructure. In the energy sector, Super Typhoon Goni alone destroyed UsD 56.3 million worth of infrastructure in the country's 25 provinces. Noting the increasing difficulty for fast and timely recovery, it is apparent that the financial impacts of these climate events are outstripping the country's capacity to withstand climate shocks. Given this, the country's action to reduce emissions helps to safeguard Philippines from the harsh effect of climate change and strengthen its ability to handle these challenges. The scale of financing needed to meet Philippines' climate goals is colossal, with an I See Our World in Data Philippines GHG emissions (

estimated UsD 168 billion in green investment opportunities between 2020 and 2030. Climate investments between 2017 and 2021 account for only I percent of total cross border investment, substantially below its regional peers. Whilst seeking greater access to external alternative sources is important, it is also a strategic imperative to expand Philippines' domestic financial sector's capacity to support and accelerate the Low Carbon and Climate Resilient (LCCR) transition, which will require multiple sources of finance. To address the various climate related challenges and financial risks and opportunities facing the Philippines, the financial sector regulatory authorities, including Bangko Sentral rig Pilipinas {'BSP'j, the Insurance Commission I'IC') and the Securities and EXchange Commission I'SEC'), under the auspices of the Financial Sector ForumZ IFSF) is setting up an extensive engagement on greening the financial sector in the Philippines. The overall objective of the program is to advance the financial sector's understanding and management of climate-related risks, while also growing sustainable finance opportunities. A key component focuses on supporting efforts to develop a sustainable finance taxonomy for the financial sector with a view to mobilizing and scaling sustainable finance and would be significantly informed by the Philippines Sustainable Finance Roadmap and Sustainable Finance Guiding Principles. A sustainable finance taxonomy is a tool to classify whether an economic activity is environmentally and socially sustainable. Once classified, a taxonomy can act as a guide for a variety of users, including companies, investors, financial institutions, regulators, and consumers, to help them make an informed decision to originate, invest, finance, purchase or monitor an asset, product, project, activity, company, or portfolio. In turn, with appropriate supporting policies and incentives, financial flows can be increased and redirected towards environmentally and socially sustainable objectives. A taxonomy likewise promotes transparency and credibility by minimizing the risk of greenwashing and supports a just transition to a sustainable economy. The FSF has developed these Sustainable Finance Taxonomy Guidelines IsFTG) extensively drawing on version 2 of the ASEAN Taxonomy's Foundation Framework, adopting as a first phase a 'principles-based' approach to determining whether an activity aligns with the SFTG, with variations to account for national circumstances. The SFTG will initially focus on the objectives of climate change mitigation and climate change adaptation, with a view to adding ecosystems and biodiversity and circular economy, as well as potential social objectives in future iterations, Other environmental and social factors are considered through additional 2 This is a voluntary inter-agency body comprised of the BSP, SEC, IC, and the Philippine Deposit Insurance Corporation (PDIC}.

screening based on the 'do no significant harm' principle, and minimum social safeguards, appropriate to the Philippines context. Certain activities are excluded from alignment with the SFTG, following existing Philippine sustainabi"ty frameworks. This does not mean that they are unable to be financed, nor does it mean that they are inherently 'unsustainable'. Rather they reflect the fact that a 'substantial' contribution to an objective requires a certain level of ambition and that certain activities are already recognized as inappropriate for a label implying sustainability, A traffic light approach has also been used to reflect an 'Amber' or transition category and a set of guiding questions and decision trees have been included to support users of the taxonomy as they undertake a screen of theiractivities' compliance with the SFTG. A separate user guide will contain use cases. Particular focus has been given to the significant role of MsMEsin the Philippines economy adopting a risk-based/proportionate approach to alignment for MsME's. This is to ensure that MsME's are not unduly excluded from participating in sustainable finance.

Glossary
Activity An Activity takes place when resources such as capital, goods, labor, manufacturing techniques or intermediary products are combined to produce specific goods or services, It is characterized by an input of resources, a production process, and an output of products (goods or services). For the purposes of assessment, an Activity may be defined as an expansion or significant upgrade of an existing Activity. Adaptation Assessor This refers to the adjustment in natural or human systems in response to actual or expected climatic stimuli or their effects, which moderates harm or exploits beneficial opportunities. Assessment Carbon capture The capture of carbon dioxide (CO2) from large point sources, and Storage (CCUSj such as power generation or industrial facilities. If not being used on-site, the CO2 is compressed and transported to be used in a range of applications or injected into deep geological formations. This refers to a person or organization which assesses an activity and assigns a classification based on the Sustainable Finance Taxonomy Guidelines (SFTG). This refers to the process by which the applicability of classification of an Activity is determined. Carbon Lock-in Climate Finance Carbon lock-in occurs when transition ing to cleaner and more sustainable energy sources is rendered more difficult due to the existing infrastructure and economic systems being built around the use of carbon-based fuels. Company This refers to resources that have been allocated or may be utilized towards the climate change adaptation and mitigation requirements of the country and its vulnerable communities (Climate Change Act of 2009, as amended by Republic Act No. I0174). This means the organization seeking classification of an Activity. 6

Do NO Significant
Harm ONSH)
Environmental
Impact
Assessment
Environmental
Objectives (EO)
This refers to the principle that an activity which makes a substantial contribution to one of the official Environmental Objectives selected for this taxonomy should not cause significant harm to any of the other Environmental Objectives. Essential Criteria {EQ A comprehensive document of a project's environmental and social risks and impacts according to Philippine law, This initially comprises Climate Change Mitigation and Climate Change Adaptation. This forms part of the assessment of an activity under the SFTG. Mitigation This comprises Do NO Significant Harm (DNSHj, Remedial Measures to Transition (RMT) and Minimum Social Safeguards (Mssj. Similarly, the EC is considered in the assessment of an activity under the SFTG. Micro, Small and Medium Enterprises (MsMEsj Within the context of climate change, this refers to human intervention to reduce arithropogenic emissions sources and enhance removals by sinks of all GHG, including- ozone￾depleting substances and their substitutes. The MsMEs are defined in two ways in the Philippines - by employment size and by asset size, either of which may be applied in the SFTG. The Philippines Statistical Authority classifies an enterprise as a micro if it has less than 10 employees; small if it has 10-99 employees; medium with 100-199 employees; and largeifit has 200 or more employees' Minimum Social Safeguards (Mssj The Magna Carta for Micro, Small and Medium Enterprises (as amended to 2008) classifies an enterprise as micro if it has up to Php 3,000,000 asset size; small if it has Php 3,000,001- 15,000,000 asset size; medium if it has Php 15,000,0001- 100,000,000 asset size; and large if it has Php 100,000,001 and above asset size. The social standards aim to ensure that the entities doing the activities comply with national regulatory requirements. This assessment is typically done at the company level as opposed to the activity level. Applying this principle ensures that the

Remedial
Measures to
Transition (RMT) activity achieving an Environmental Objective is not done while harming a social aspect. Substantial Contribution This refers to the measures that must be undertaken to remove or render insignificant any actual or potential significant harm to an Environmental Objective, In this SFTG, particular time periods can be allocated for an activity to be aligned. Sustainable Finance The level of contribution required by an activity towards an Environmental Objective to qualify as Green or Amber, provided other Essential Criteria are met. This refers to any form of financial product or service which integrates environmental, social and governance criteria into business decisions that support economic growth and provide lasting benefit for both clients and society while reducing pressures on the environment. Sustainable finance includes, as a subset, green finance which is designed to facilitate the now of funds towards green economic activities and climate change mitigation and adaptation projects. Certain definitions have been borrowed from and adapted from the ASEAN Taxonomy Version 2.

I. . The Philippine Context for Sustainable Finance
The increasing adverse impacts or climate change in the Philippines could potentially be a potent threat to the stab"ity of the financial sector. Most concerning is the prospects of the sector's high vulnerability to climate-related risks - both physical and transition risks. The country is in the Circum-Pacific Belt (the "Ring of Fire") and has high exposure to natural hazards (typhoons, landslides, floods, droughts, earthquakes, volcanic eruptions), strong dependence on a climate-sensitive agricultural sector, and vast coastlines where all major cities and most of the population reside. The Philippines alsolies in the world's most cyclone-prone region. The disruptive effects of climate-related disasters have the potential to adversely affect production and the economy more broadly. Climate-related risks are thus highly material for the financial sector as climate-related disasters cam affect and in fact are already affecting - credit, market, operational and underwriter risks, threatening the profitability and solvency of banks and insurers trigure I). In addition, Philippine banks are exposed to shocks as the economy adjusts to a low carbon environment through their holdings in polluting and carbon-intensive industries. For example, the banking sector's loan exposure to power generation is at 109'0 of the total loan portfolio. Transition risks also affects several other financial institutions, including insurance providers exposed to polluting and carbon-intensive assets, investment businesses that own shares of high carbon emission producers, pension funds investing in high carbon emission properties and assets, as well as reinsurance firms that offer protection against climate￾related disaster. In the short run these exposures pose increasing reputation al risks, while over the longer run these assets run the risk of becoming stranded and increasingly pose threats to financial stability.

Figure I. - Climate Risk Dimensions and Impact on Financial Markets
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Raina colts, rid 91th"I'mnqain ", Mie lampo^y and uponie andv, jus Source: Climate Change and Financial Risk, Pierpaolo Grippa, IOChen Schmittman, and Pelix Suntheim (Finance & Development, December 2019) Harm 10s^ Ich,
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In the meantime, the Philippines has made considerable progress towards realizing its vision of becoming an upper-middle-income country by 204-0. High growth and job creation, together with increased public spending on education and health, helped millions of Filipinos lift themselves out of poverty, with poverty falling an average of 1.2 percentage points per year between 2010 and 2019. Although many challenges remain, including high inequality and low human capital development, the Philippines seems to be on an upward path, and is poised to graduate to upper middle-income status and achieve its objective to become a prosperous middle-income country free of poverty by 2040 (Am Bisyon Natin 2040). With the strong GDP growth and significantly reduced poverty levels, however, greenhouse gas IGllG) emissions have also grown (Figure 2). Triadion Ris INky, IQ, himqr. IOH. o11.3re "0U, "I". big. 11.1 traderIthl rid 'umor, telcom! pel"Qn, "I town groan and pod:" alec!rigfrian, "I ling lass 011. 'alignllts* r nanny riskl
Figure 2 - Observed Poverty Reduction, GDP growth and GIIG Emissions Growth
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Recognizing climate change as one the biggest global challenges and the efforts required to deal with global warming and its adverse impact, the Government of the Philippines has set out policy responses in its key national strategic documents IFigure 3}. While the Philippines' share of global GHG emissions is less than 0.5 percent as of 2021, it recognizes its international commitments under the Paris Agreement to reduce GHG emissions, as well as the opportunities of GHG mitigation for sustainable development and co- benefits including pollution prevention, It demonstrates the country's responsibility in addressing common threats as the Philippines may be highly vulnerable to the impact of climate change. The country's action to reduce emissions helps to safeguard Philippines from the harsh effects of climate change and strengthen its ability to handle these challenges. For example, the Nationally Determined Contribution (NDC) committed under the CoP Paris Agreement considers the Philippine Development Plan (2017-2022), Philippine Energy Plan 12018 ~ 2040}, National Security Policy (2017-2022), National Climate Risk Management Framework (2019) and the Sustainable Finance Framework (2020). The Philippines NDC outlines its desire to reduce and avoid GHG emissions by 75 percent by 2030 (with 72.29 percent conditional). The conditional NDC target could potentially open up new strategies and opportunities to improve and scale sustainable finance within the financial sector.
Figure 3: NDC Alignment to National Development Plans
Climate
Change Act of 2009 as amended in
2012
National
Climate
Change
ACUon Plan
2011-2028
Philippine
Energy Plan
2020-2040
Additionally, in 201.6, the Philippines passed the Greenjobs Actto promote sustainable growth, create decent jobs and build resilience against climate change through incentives to businesses generating green jobs. Equally, the Department of Environment and Natural Resources of the Philippines is pursuing sustainable management and development of the environment by creating greenjobs for the blue and green economy. 3 Philippine Development Plan 20232028 National Framework Stintsgy on Climate Change 2010-2022 Commitments to act are riot enough. They must be underpinned by seeking avenues to bridge the financing gaps. Climate finance calls for the mobilization of funds from public, private, national, and transnational Philippine National Sealrlty Policy 20232028 National Climal, Risk Management Framework of 2019 R Nailonal Renewable Energy Program 2020-2040 Sustainable Finance Policy Framework of 2020 2 22 National Disaster Risk Redudion and Managemenl Plan 20.1-2028

sources to support mitigation and adaptation actions that will address climate change. GlobalIy, data suggests the estimated global gap for adaptation is large and widening. The adaptation finance gap is widening and now stands at between Us0194 billion and Us0366 billion per year. In developing countries alone, adaptation costs are expected to rise to up to Us $340 billion a year by 2030, and up to Us $565 billion by 2050. The gap for mitigation is even larger, at Us $850 billion per year by 20304. The scale of financing needed to meet the Philippines' climate goals is colossal and it calls for the financial sector to rapidly expand its capacity to support financing the low-carbon and climate-resilient (LCCR) transition, above the Government's own fiscal allocation and spending. For example, from 2016 to 2022, PhP2.01 trillion (Us $35.95 billion) has been tagged as climate budget by national government agencies using the Climate Change Expenditure Tagging (CCET) Framework, which represents 5.8 percent of the total appropriations during the same period, with more than 90 percent towards building climate resilience to adapt and mitigate the adverse impact from extreme, intense, and frequent weather events. There is an estimated UsD 168 billion in green investment opportunities between 2020 and 2030, including UsD 39 billion for greening existing and future energy infrastructure, UsD 104 billion for climate￾smart cities and UsD 25 billion for accelerating the green transition in selected sectors. However, the Philippines only attracted UsD 0.6 billion in green investment from foreign companies between 2017 and 2021, mostly in renewable energy. Climate investments between 2017 and 2021 account for only I percent of total cross border investment, substantially below its regional peers5. Whilst seeking greater access to external alternative sources is important, it is also a strategic imperative to expand Philippines' domestic financial sector's capacity to support and accelerate the LCCR transition, which will require multiple sources of finance, noted in Table I below.
Table t: Sources of Financing for the LCCR Transition
Climate-Informed public finance Environmental tax reforms Green finance Concessional finance supporting Disaster r sk f nance Including nsurance mitigation measures Technology transfer Source: World Bank Group, Philippines Climate Change and Development Report, 2022 Fiscal Finance Private sector 4 WBG Philippines CCDR 2022 and International Finance Corporation OFC) 2021. Ctrl-Alt-Delete, A Green Rebootfor Emerging Markets. Washington: IFC Mitigation 12

2. The Sustainable Finance Taxonomy Guidelines
   To address the various climate related challenges and financial risks and opportunities outlined above, the financial sector regulatory authorities Uricluding Bangko Sentral rig Pmpinas I'BSP'j, the Insurance Commission ('IC'I and the Securities and EXchange Commission ('SEC'j under the auspices of the Financial Sector Forum6 (FSFj pursued extensive stakeholder engagement on greening the financial sector in the Philippines. The overall objective of the program is to advance the financial sector's understanding and management of climate-related risks, while also growing sustainable finance opportunities. A key component focuses on supporting the efforts of financial sector regulatory authorities, government agencies as well as financial sector participants tsuch as financial institutions, insurance companies, bond issuers, broker-dealers, portfolio managers and investment houses) on developing a sustainable finance taxonomy for the financial sector to mobilize sustainable finance.
   2.1 Definition or Sustainable Finance
   Under Philippine Law, sustainable finance refers to any form of financial product or service which integrates environmental, social and governance criteria into business decisions that support economic growth and provide lasting benefit for both clients and society while reducing pressures on the environment. Sustainable finance includes, as a subset, green finance which is designed to facilitate the flow of funds towards green economic activities and climate change mitigation and adaptation projects. Climate finance, in turn, refers to resources that have been allocated or may be utilized towards the climate change adaptation and mitigation requirements of the country and its vulnerable communities. 7 This is consistent with other definitions, such as those used by the World Bank Group: Sustainable Finance means practices by financial institutions and other financial sector participants that reduce and manage environmental, social and governance (ESG) risks resulting from or affecting financial sector activities, including climate change risks, and that encourage the flow of capital to assets, projects, sectors, and businesses that have environmental and social benefits, including climate change mitigation and adaptation8. This is an inter-agency voluntary body comprised of the BSP, SEC, IC and the FDIC. Republic Act No. 9729, otherwise known as the "Climate Change Act of 2009"", as amended by Republic Act No. 10/74 W I Bilk M n:A na I h t s:
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The European Commission also defines sustainable finance as the process of taking BSG considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities and projects. 9 Purpose of the Sustainable Finance Taxonomy The Sustainable Finance Taxonomy Guidelines us ETG) align with the Philippine Sustainable Finance Guiding Principles to advance sustainable finance in the country, In 2021, the Philippines Sustainable Finance RoadmaplO was introduced to give direction to and promote sustainable finance in the Philippines. It intends to give financial institutions, regulators, and other stakeholders a framework for incorporating BSG factors into their corporate plans and daily operations. In this regard, the Philippines Sustainable Finance Guiding Principles were developed (Table 2) to establish a common understanding at a high-level as to what constitutes a 'sustainable' economic activity. The SFTG takes a step further and outlines a more detailed method of assessing activities. 2.2 The SFTG serves as a tool to classify whether an economic activity is environmentally and socially sustainable and guides different stakeholders in making informed investment or financing decisions. The SFTG aims to direct and increase capital flows to economic activities that further sustainability objectives, including GHG emission reduction and building climate resilience. This likewise promotes transparency and credibility by minimizing the risk of greenwashing and supports a just transition to a sustainable economy.
Table 2 : The Philippine Sustainable Finance Guiding Principles
Guiding Principle ^: Climate Change Mitigation and Adaptation Guiding Principle 2: Promoting Transition to a Low Carbon Economy Guiding Principle 3: Resilient Food Systems Guiding Principle 4: Sustainable Cities Guiding Principle 5: Sustainable and Resilient Infrastructure for Inclusive Growth and Poverty Reduction Guiding Principle 6: Environmental Management and Conservation Guiding Principle 7: Prohibited Activities fnti 10Tli PITili} me u inable Finan Ro dinai h IW Roadmao. liar W. I 11 F'nan 11 EUr, I In 111 I WWW. dor. ov. h w - n lit u loads 221 10 AL EP I Iii Ir Iilll

2.3 Potential Users of the Philippines Sustainable Finance Taxonomy
Guidelines
Whilst the taxonomy is a guide primarily for participants of the financial sector and its regulators, there are however a range of other potential users'
Table 3 : Target Users and Potential Uses of the SFTG
TARGET USERS POTENTIAL USES
Policy makers/ . Identify relevant and additional areas where to focus government investment to accelerate the achievement of objectives of the taxonomy. . Facilitate the development of a pipeline of sustainable projects in accordance with national priorities for sustainable development. . Serve as reference for policy makers as they develop strategies to achieve national climate change commitments, such as those in the country's NDC targets and Sustainable Development Goal (SDG} agenda and improve associated systems for tracking and measuring finance flows. rinandal Regulators Help with the sustainable development of the financial sector by:
. Supporting regulatory interventions (e. g. , incentives, guidance, and capacity building, etc. ) based on the guiding principles to encourage banks to lend to taxonomy-aligned projects or economic activities, and insurance companies to issue eligible products as well as invest in assets and activities aligned with the taxonomy. . Assisting in the development of new climate- or sustainability-related reporting or disclosure guidelines for financial market actors or enhancing existing ones. , Gauging financial flows toward taxonomy priorities at the transaction-level, investment and lending portfolio, institutional, and national levels. . Protecting reputation of the financial sector/institution by preventing "green washing". . Informing future supervisory actions and expectations from regulated entities in relation to climate and sustainability-related risk management . Create, structure, track, and label taxonomy-eligible sustainable financial products tsuch as loans, pooled fund/investments, insurance and guarantees) more easily￾Banks, Insurance Companies, and other financial institutions

TARGET USERS POTENTIAL USES
Develop inclusive financial solutions such as instalment plans to pay electric services for off-grid solar systems, weather/livestock index insurance, financing high-value crop diversification by small farmers, financing weather proofing homes etc. Support sustainable financing and investment decisions {e. g. , asset acquisition, project financing, lending, and insurance activities). Understand and disclose exposure to sustainable investments, insurance (e. g. , underwriting) and lending, as well as other exposures, as required by regulators. Evaluate existing products or exposure of banks, insurance companies and/or other financial institutions Ie. g. , reorienting capital flows, increasing transparency and supporting risk management in a more holistic way). . Identify opportunities that comply with sustainability criteria for high-impact investments. . Disclose exposure to sustainable investments through reporting, as required by regulators, Identify eligible activities that can contribute to the taxonomy objectives. Plan and design new taxonomy aligned, transitioning. Create, structure and label green/sustainable bond. Enable companies to translate taxonomy objectives into tangible business strategies. Secure new business opportunities with larger companies that are required to comply and disclose on taxonomy alignment and specific metrics. Where a taxonomy is linked with sustainabiiity-related disclosure requirements, large enterprises and MsMEs can communicate the degree of performance of their economic activities to financial institutions, stakeholders, and other non-financial institutions in relation to their sustainability objectives. Compile disclosures against the taxonomy objectives regarding capital expenditure, operational expenditure, and turnover. These are business activity indicators that could be used to determine, report, and disclose the degree of taxonomy alignment. Promote financing to MsMEs for adaptation and resilience. Use as support based on being taxonomical Iy and thematicalIy aligned, Investors/providers of capital Green/sustainability bond issuers and other relevant users, such as certifiers and verifiers Non-financial institutions IMSME and large enterprises) projects and activities to be moving toward business

TARGET USERS
Depositors
2.4 The SFTG Guiding Principles
POTENTIAL USES
Depositors, in particular those driven by Environmental and Social concerns have the potential to become a significant source or retail finance for banks. A taxonomy can enable banks to credibly market 'taxonomy aligned' deposit products, which can then be intermediated into green lending products. The SFTG follows several key principles, including adopting a phased approach, being designed for inclusivity, relates to key government policies and regional frameworks, and takes into account the transition towards a low-carbon, climate resilient economy. tai A Phased Approach . The Philippines has begun a comprehensive approach to building a Sustainable Finance Taxonomy in response to the growing demand from market participants for standardization and direction in recognizing sustainable investment assets and qualified economic activities. The SFTG involves a sector-specific approach to provide more targeted criteria for assessing the sustainability of economic activities. The alignment of the SFTG with the country's NDC sectors focuses financial efforts on addressing climate change. It aligns with national policies, supports risk management, facilitates green investments, promotes transparency, and encourages collaboration. Acknowledging the dynamic nature and complexity of identifying sustainable finance activities, the Philippines has implemented a phased approach to guarantee the effective, iterative, cooperative, and user-focused development of the taxonomy. This allows for assessors to qualitativeIy analyse alignment with the SFTG through guiding questions and decision trees. External assurance of alignment at this phase of the taxonomyis not mandatory. This methodology is an essential first step toward an activity-based approach backed by comprehensive "Technical Screening Criteria" and appropriate thresholds in line with science-based evidence and domestic policies. They should reflect the plans, priorities, and activities of the government to achieve its climate-and"sustainability-related commitments. This phased approach gives users the time they need to modify their internal procedures. The SFTG intends to promote transparency and credibility by minimizing the risks associated with

greenwashing, encourage coinparability, direct financing towards taxonomy￾aligned initiatives, and ease the shift of economic activity towards sustainability, (bj Inclusive and Practical Qualitative Framework . The SI?TG is designed to be inclusive, offering direction and clarity for the financial sector and other potential users when it comes to recognizing and categorizing sustainable finance and investment activities. Because of this inclusive approach, the taxonomy may be continuously tested, adjusted, and improved upon to better suit the changing demands of its users' The SFTG incorporates decision trees, guiding questions, and use cases to simplify the process for users when qualitativeIy assessing activities against the taxonomy's objectives and essential criteria. IC) o Reference to Key Documents The SFTG references other widely used taxonomies, as appropriate and key Philippine national strategic documents. These include the Philippine Development Plan (Am bisyon 2040), NDCs, the Republic of Philippines Sustainable Finance Framework, National Strategy for Financial Inclusion, the Green lobs and SIPP/CREATE policies and Philippine Sustainable Finance Guiding Principles. It serves as an overarching guide for the financial sector and its stakeholders to operationalize the Philippine Sustainable Finance Roadmap and the Sustainable Finance Guiding Principles issued by the members of the Philippines Inter-Agency Technical Working Group for Sustainable Finance (ITSF or the 'Green Force'). Id) Greater Transparency and Accountability . Taxonomies need be linked to policies and regulatory measures that shape sustainable business conduct and practices and encourage capital flow redirection, such as disclosure regimes and policy/fiscal incentives so that they both shape sustainable business conduct and support re-orienting capital flows. The SFTG is a cornerstone for the country's transition to a stronger and more sustainable economy. It provides a thorough manual for businesses, investors, and financial institutions, supporting moral and ethical behavior while being in line with the nation's sustainable development goals. One of the main objectives is encouraging accountability and transparency in sustainable finance. It helps distinguish between economic activities that have positive, neutral, or negative effects on the environment and society by offering classifications and criteria for identifying sustainable economic activity.

lei o
Transition Activities and Market Growth
The taxonomy includes 'transition' activities, recognizing allocation of funds to initiatives actively transitioning from high carbon emission to more climate resilient alternatives. It stimulates market growth and innovation in sustainable finance, promoting the financing of goods and services that support sustainable development. by offering a framework for recognizing and assessing the environmental and social effect offinaricialactivities. Them atic bonds (such as green and sustainability bonds), green lending, green investment funds and other sustainable financial products draw funding for initiatives with positive social and environmental impacts.
2.4. I Guidance on Setting the SFTG Environmental Objectives
Selection of Philippines' environmental objectives considers national objectives, policies and priorities, the capacity of future taxonomy users to adapt their processes, and the progress of regional and other leading taxonomy developments.
Table 4: SriG Objectives - Existing and Future Objectives
SFTG Environmental Objectives SFTG Future Environmental Objectives Protection of healthy ecosystems and biodiversity Promotion of resource resilience and transition to circular economy Climate change mitigation Climate change adaptation Given the above, the SFTG objectives will initially focus on climate change, namely climate change mitigation and climate change adaptation as the Environmental Objectives. An activity should therefore have either a climate change mitigation of climate change adaptation focus tor bothj to qualify for assessment under this version of the SETG. Future iterations will address ecosystems and biodiversity and the circular economy, as well as a potential social component. Other environmental and social factors are considered through additional screening based on the DNSH principle, and Mss, appropriate to the Philippines context. The taxonomy guidelines recognize the transition pathway of the Philippines in which certain carbon-intensive activities may continue but be adjusted to meet the 2030 target of 75 percent GHG emissions reduction.

The National Framework Strategy on Climate Change 2010-2022 INFSCC) considered mitigation an opportunity to capitalize on the country's GIIG mitigation potential, lI supported by laws like the Renewable Energy Act (REA) while providing development co-benefits, including pollution prevention. The National Climate Change Action Plan 2011-2028 (NCCAP) envisions that public financing will prioritize adaptation to reduce community vulnerability and risks while encouraging private sector participation to optimize mitigation opportunities for sustainable development. Philippines government policies likewise emphasize adaptation, with mitigation actions to be pursued largely as a function of adaptation. The NFSCC sets a risk-based framework for national and sub-national climate policies to build (a) the adaptive capacity of communities and increase the resilience of natural ecosystems to climate change and Ib) optimize mitigation opportunities toward sustainable development. The Department of Environment and Natural Resources (DENR) during the 28th Conference of the Parties to the United Nations (UN) Framework Convention on Climate Change (CoP28) presented highlights of the National Adaptation Plan (NAP} and the Nationally Determined Contribution Implementation Plan (NDCIP) to various stakeholders during the panel discussion, "Turning the Tide:
The Philippines' journey to Climate Resilience". While still pending finalization, the initiatives outline the country's pathways towards resilience and mitigation, entailing an intensely focused and accelerated multi-stakeholder process that different departments of the government and various stakeholders are participating in. 12 The Environmental Objectives of climate change mitigation and adaptation would define the types of economic sectors and activities that can support the transition to a low emission and climate-resilient economy. For the Philippines, the transition to a low-carbon and climate-resilient economy would consider the evolution of the entire system, including national policies and regional initiatives. 11 Philippines emits an average of 1.98 metric tons of carbon dioxide equivalent per capita (2020 figures) which is far below the global average (4 metric tons per capital, Philippines NDC 2021, committed to take the following steps under its NDC: a projected GHG emissions reduction and avoidance of 75 percent, of which 2.71 percent is unconditional and 72.29 percent is conditional, representing the country's ambition for GHG mitigation for the period 2020 to 2030 for the sectors of agriculture, waste, industry, transport, and energy.

24.2 Sector Coverage of the SFTG
GHG emissions in the Philippines are low but growing as the economy expands. Energy and transport are expected to account for most of the growth in Philippine emissions (Figure 5 belowj. According to the World Bank Group Country Climate and Development Report (CCDR) for the Philippines, in 2018, total emissions accounted for about 0.8 percent of regional emissions in East Asia and 0.3 percent of the world's total. As of 2020, Philippines emitted an average of 1.98 metric tons of carbon dioxide equivalent per capita, below the global average (4 metric tons per capita)13. GHG emissions rose from 90 megatonnes (Mt} in 1990 to 227 Mt in 2020 and are expected to continue growing14. However, the carbon intensity of emissions growth has been low and decreasing compared to peers. 15 The energy sector accounts for 56 percent of total GHG emissions, while agriculture is the second largest source, accounting for 27 percent of emissions (Figure 6). Transport is the biggest fossil fuel-consuming sector and the largest source of urban air pollution. The overall share of fossil fuels in the primary energy supply increased from 60 percent in 2010 to 67 percent in 2019 due to the rapid growth of coal-fired power generation and sustained growth in oil demand from transport. Total final consumption for transport has significantly reduced in 2020, making residential the top sector for energy consumption (Figure 8), The total primary energy supply is expected to triple to 156 million tonnes of oil equivalent (Mtoe) in 2040, compared with 56 Mtoe in 2020. The country's per capita emissions {2.2 million tonnes of carbon dioxide equivalent or MtC02e) are among the lowest in East Asia, below those of Indonesia (3.7 tC02), Vietnam (4.7 tC02), and China (9 tC02).^6 I philippines NDC 2021, 14 As of 2021, the Philippines is the world's 38th largest emitter of GHG, representing 0.48 percent of the global total, with per capita emissions art. 27 tons of CO2 equivalent, wellbelow the global average (6.9 tC02ej. See Our World in Data Philippines GHG emissions ( World Bank Group, Philippines Country Climate and Development Report, November 2022 World Bank Group Philippines Country Climate and Development Report, November 2022

Figure 4: Total Philippines GHG Emissions by Sector 1,990-2020/7
CLIMATEWATCH GHG Emissions and Eiifigsioiis Tatgets lit ,hil, ,,>meS I*.,," gullt, Cl, ,.,"I, \V. 1141i o 1990 199g
Figure 5: Expected Growth of Emissions in the Philippines
400 Foiest and land use Aerial tore Waste Industrial processes Transport Erreigy 350 300 250 01 200 o ~ 150 ^ 100 50 o -50 2020 2021 2022 2023 2024 2025 2026 2027 Source: Philippines NDC 1098 2002 227.52Mt * 2006 2010 2014 2018 2022 2026 2029 2030

robin"Icon, un"lionjTFClby coc!a Philippine, ,990-2020
Figure 6: Total Final Consumption of Energy by Sector, Philippines 1.990-2020
SOURCE: IEA 11
11.00
2.4.2a Priority Sectors
The SFTG primarily focuses on the sectors used in the Philippine NDCs. For the climate change mitigation objective, these sectors reflect the nation's top priorities for lowering GHG emissions and mitigating climate change's effects:18 19:Ja 191J, tvv. ,. I a. r ,Un lung In 11 2,100 7007 Con". 1.1".. d pub ".. I". 11i 2Uiu 2006 Energy: The energy sector, including electricity generation, accounts for the largest share of GHG emissions in the Philippines IPSIC Section D). Transport: The transport sector, including road transport, aviation, and shipping, is the second-largest source of GHG emissions in the Philippines. (PSIC Section H). Waste: The management of solid waste, including landfill sites and waste incineration, is a significant source of GHG emissions in the Philippines, (PSIC Section E). Industry: The industrial sector, including manufacturing (PSIC Section C), construction IPSIC Section F), and mining (PSIC Section B), is a significant source of GHG emissions in the Philippines. Agriculture, Forestry, and Other Land Use (AFOLU): This sector includes emissions from agricultural activities, such as livestock and rice production, as well as emissions from deforestation and forest degradation reSIC Section A). An, ."11u. .,,""I" ,008 2010 aui? cola 2016 2018 21nL' Philiooines' NDC 2017

Coastal and Marine Resources: This sector includes emissions from coastal and marine ecosystems, such as mangroves and seagrasses, which can release carbon when they are degraded or destroyed. The selection of these sectors shows the Philippines' commitment to reducing GHG emissions in all sectors of the economy, as well as its focus on adaptation and resilience-building measures to address the impacts of climate change, The NDC also recognizes the important role of cross-cutting issues, such as gender, indigenous peoples, and poverty reduction, in achieving sustainable and climate￾resilient development in the Philippines. Risks to these social aspects would be mitigated through the proposed adoption of minimum social safeguards as provided in Section 3.6.6. In addition, although some sectors were not highlighted in the Philippine NDC using GHG emission and economic data, several 'enabling' sectors considered crucial for climate change mitigation and adaptation are included in this SFTG. For the climate change adaptation objective, it is riot proposed that specific sectors be prioritised, though taking into account the Philippine adaptation plan, and the findings of the World Bank CCDR, particular attention could be given to financing of adaptation activities in support of:

Agriculture, Fisheries and Food Security
Water Resources
Health
Ecosystems and Biodiversity
Cultural Heritage, Population Displacement and Migration
, Land Use and Human Settlements
Livelihood and Industries
-. Energy, Transport and Communications
24.2b Enabling Sectors
Enabling sectors are those which improve the performance of other sectors and activities and do not themselves risk harm to Environmental Objectives. 19 These sectors are important for the decarbonisation of the economy and might not otherwise be included in the SFTG if only emissions intensity and gross value added are considered:20 19 Taxonomy: Final Report of the Technical Expert Group on Sustainable Finance IMarch 2020j 20 ASEAN Taxonomy for Sustainable Finance Version 2 Information and Communication OCT): This sector is important for digital transformation and the improvement of efficiency of activities in

emissions-intensive sectors. Activities such as data-driven solutions, resource efficiency software, meteorological solutions for adaptation, and direct mitigation, together with physical infrastructure, such as data centres, are essential for overall decarbonisation and resilience. Professional, scientific, and technical activities: The activities of this sector are related to the implementation of efficiency measures across sectors, technical studies, research, and capacity building linked to the decarbonisation of the economy. Examples include solar water heater installations, retrofit of buildings, renewable energy installations, and equipment, as well as feasibility studies linked to taxonomy-related activity implementation. Carbon capture, utilisation, and storage (CCUS): Activities related to the artificial capture, storage, and transformation of carbon emissions into products are essential for enabling activities in high emission sectors such as manufacturing (e. g. , manufacturing of cement and steelj and in the transition of certain sectors (e. g. , existing natural gas plants with carbon capture and storage). The financial sectoris also central to the implementation of the SFTG as they will develop green financial products, frameworks, and services supporting taxonomy aligned activities.

. Assessment of Activities Under the SFTG The following section outlines the process of assessing an activity under the SFTG,
3.1 The Generic approach to assessment
The following questions would be asked when assessing an activity. Is the Activity an Excluded Activity? Is the Activity in compliance with Philippines laws? Does the Activity substantially contribute to at least one Environmental Objective? Does the Activity avotd actual/potential harm to the other Environmental Objective? If there is harm/potential harm, has it been reined lated or will it be reinediated within the required defined period?
3.2 Excluded Activities
A user will first assess as part of its due diligence, if an activity is an 'Excluded Activity' as adapted from the Republic of Philippines Sustainable Finance Framework2i:

Exploration, production or transportation of fossil fuel, fossil-fuel power￾generation related projects;
Manufacture and production of finished alcoholic beverages; Lethal defense goods; Military contracting; Gambling; Weaponry; Non-RSPO-certified palm oil; Manufacture and production of finished tobacco products; Conflict minerals; Activities/projects associated with child labor/forced labor; > > , > > , > > > 21 it s: W\'W. T n U F w rk-v -w ov. h w -coll en I loads 2022 I Re libli - 11in r r ill -SIIstaiiia

Extractive mining;
Production or trade in wood or forestry products other than from sustainably managed forests; And, to the extent that DNSH and Mss requirements cannot be complied with:

Projects involving involuntary resettlement and impact on livelihood
(i. e. , demolition of residential communities); , Projects which would affect ethnic minorities/indigenous people and the lands they own or claim; Projects located near any protected areas. > There are nonetheless certain excluded activities that may be considered enablers of climate change objectives (e. g. , extracted minerals critical to the energy transition, renewable energy technologies or energy efficient products). In this instance, a user may consider an assessment under the Amber category, provided the activity meets all decision tree requirements. 22 Unless specified otherwise, an Excluded Activity is not aligned with the SFTG and is considered outside of scope.
3.3 Compliance with laws
If the activity is illegal under Philippines law, or is in breach of environmental laws and regulations, as referenced in the Philippine Sustainable Finance Guiding Principles, the activity is considered out of scope of the SFTG. A non-exhaustive list of relevant environmental laws is included here:
I.

Presidential Decree No. 1152 - Philippine Environment Code Republic Act No. 9275 - Philippine Clean Water Act of 2004 Republic Act No. 8749 - Philippine Clean Air Act of 1999 Republic Act No. 11038 - Enhanced National Integrated Protected Areas System Act Republic Act No. 9147 - Wildlife Resources Conservation and Protection Act Republic Act No. 9003 Ecological Solid Waste Management Act of 2000 Republic Act No. 6969 - Toxic Substances, Hazardous and Nuclear Waste Control Act of 1990 Presidential Decree No. 1586 - Environmental Impact Statement {EIS) Statement of 1978 5. 6. 7. 8. Z This recognizes the distinction between the Republic of Philippines Sustainable Finance Framework, which on I recognizes "green" activities, and the SpyG. which also recognizes "Amber" categories.

9. Presidential Decree No. 705 - Revised Forestry Code
10. Republic Act No. 7942 - Philippine Mining Act of 1995
11. Presidential Decree No. 1899 - Small-scale Mining Law
12. Republic Act No. 4003 - The Fisheries Act
13. Republic Act No. 9367 - the Biofuels Act of 2006
14. Republic Act No. 9513 - the Renewable Energy Act of 2008
15. Republic Act No. 1/285 - the Energy Efficiency & Conservation Act of 2019
16. Republic Act No. 11697 - the Electric Vehicle Industry Act (the "EVIDA") of
    2022
17. Republic Act No. 7611 - Strategic Environmental Plan for Palawan Act
    3.4 The 'traffic light' classification system
    Activities are then assessed according to a series of criteria, guiding questions and decision trees to ultimately determine corresponding classification as "Green" "Amber" or "Red". The principles-based approach to classifying activities aims to offer simplicity by undertaking a qualitative assessment of an entity's activity against the relevant Environmental Objectives (EO) and then applying the Essential Criteria. They are designed to accommodate different users of the SFTG. A summary of the classifications is included below:
    Table 5: Summary of Classification of Activities for SFTG
    Category Definition
    The Activity is making a substantial contribution to an EO and meets the Essential Criteria of DNSH and Mss, The Activity makes a substantial contribution to an EO but causes significant harm to another EO. However, that harm can be reinediated within 5 years or an independent verification supports a claim that reinediation will take less than 10 years' It must also meet the Essential Criteria of DNSH and Mss. The Activity does riot serve any EO or meet the Essential Criteria. Amber An activity that falls under the "Red" classification may still be eligible for 'unlabelled' financing, and it does not imply that the activity is unsustainable. Rather, it does not meet the higher sustainability ambition of the SFTG, nor pass the DNSH or Mss tests.

3.5 Choosing an Environmental Objective
An EO (being either Climate Change Mitigation or Climate Change Adaptation in this version) is chosen first. Both EOS can be listed. However, a single EO must be considered as the 'primary' objective and stated in any assessment. Guidance on choosing the relevant EO considering certain factors is provided below.
Table 6= Choosing an Environmental Objective
. Activity Relevance and 2.1nvestors I Financial Strategic Alignment Institutions' Priority Which EO is most . Whatis the investors' relevant to the Activity? priority and investment What is the strategic strategy? focus of the Company o Which EO(s) is most doing the Activity? aligned to the investors' Which EO(s) is most priority and strategy? aligned to the Company's strategic focus?
3. Government and Industry
Guidance
. Has the government issued any guidance (including policies, roadmaps, and guidelinesj whichindicates that this Activity contributes to a specific EO under the NDC or national plans? . Is there guidance (including policies, roadmaps, and guidelines) from the sectoral bodies which indicates that this Activity contributes to a specific EO under a sectoral plan? Companies should use their judgement, given the responses to the questions, to determine which EO is the most relevant to the activity being assessed. If the selections remain ambiguous, companies can refer to the guiding questions and narrative below for each EO to better understand its relevance.
3.5. ,. Guidance on 'substantial' contribution
Some activities by their nature substantially contribute to an EO and are eligible for taxonomy alignment. These are activities which help with decarbonisation or improving adaptability to climate change. For the climate change mitigation objective, this might include solar power installations that reduce or avoid emission. For the climate change adaptation objective, this might include physical and non-physical solutions that substantially reduce the most important physical climate risks that are material to that activity. Adaptation should be achieved without increasing the risk of an adverse impact on other people, nature, and assets more broadly. Some enabling activities substontiol!y contribute to taxonomy objectives through the provision of their products or services. For example, manufacturing low￾carbon technology such as wind farm blades, transmission line infrastructure to

service renewable energy supply, or developing technology for early warning systems for climate change adaptation. Provided they do not lock in assets undermining long term EOS, they can be considered to make an overa substantial contribution. 'Enabling' activities for adaptation can make a substantial contribution if that improves the performance of another activity, such as some nori-life insurance products, research, and development Ie. g. , in natural sciences and engineering) and related technical consultancies. This is distinguished from adapted activities, which relate to expenditure in adaptation of an investment, such as renovation of a building to improve drainage. Under a principles-based approach, there are n s determine whether an activity meets a 'substantial' threshold and requires the taxonomy user to use its own judgment in assessing the activity as guided y t e qualitative framework.
3.6 Using the Deci 10n Tree and Guiding Que tion
Having decided on the primary EO, the user can assess their activity under t e decision tree. In this first phase of the SFTG, there are two (2) decision trees: Climate Change Mitigation (Eon and Climate Change Adaptation (E02j. Further decision trees would be added in later phases for the future objectives of Ecosystems and Biodiversity and Circular Economy. Climate Change Mitigation Decision Tree and Guiding Questions (Eon An activity will meet the objective of climate change mitigation if (a) it reduces GHG emissions on a trajectory that will aim to meet the 1.5 C Paris Agreement goal or {b) the activity is not low or zero- emissions but can show it is able to avoid or reduce GHG emissions based on best practices compared to a baseline case without any mitigating action. This aligns with the ASEAN Taxonomy Foundation Framework Version 2 approach.
3.6. I.
ecific technical criteria set to to A ess an Activit If an activity makes a contribution in one or more of the following areas, it will meet the climate change mitigation objective:
Avoids GHG emissions;
Reduces GHG emissions; or
Enables others to avoid or reduce GHG emissions.

If the level of contribution is judged by the assessor to be 'substantial' then it can proceed on the decision tree towards a green label, subject to meeting other requirements.
Figure 7: The EOI Climate Change Mitigation Decision Tree - EOl. Decision Tre
Assessment for Classification of Activity
I. Cllnate Chang.
Mlllg. "on
2. PromlUg, lion
harm
,A. ActMty. cold. I reduces GHG emissions a. POSl-inI"g. "on harm 2A. ACUvity does riot Gnuse potential agriihC8,11 harm to other EOS 4 Minimum Social cof. gu. MB ,B. AC"11y gri, , other stakeholders ardorA"vlllo, ,@ injugab rillm, ,a chang. 3A. Activity rid longer couses signingant harm to other EOS at Ih. Ume classes sinnt 28 hulanen ronindlai nuns o1r. ady commaneed at inn Ibrie of USERS' rent ,A Coronany meets minlmum nationals, arithrds rel, Ung to human rights, Im"od 18baur, child laborirar, a impart on PEGpi, in Ing clogo to In hashr"r, ts SIN IA
Table 7: Guiding Questions for EOI Climate Change Mitigation - I. A and IB
Guiding Questions - EOl. IClimate Change MitigationI Does the Activity avoid Ireduce GHG emissions? I, How does the Activity substantially avoid or help reduce emissions? o Does the Activity avoid locking in high-carbon activity? Is it delaying or preventing the transition towards low carbon alternatives? o Does the Activity avoid leading to substontiol GHG emissions, includin Carbone Dioxide, Methane, Nitrous Oxide, Sulfur Hexanuoride, Nitro en tnnuoride, or Hydrofluorocarbons o Does the Activity avoid leadin to or causing extensive deforestation practices? Do the Company's policies and business strategy generally avoid contradictin or impeding alignment with the specified EOl principles?
3. Where applicable and relevant is a 3rd party certification or verification of
alignment of Activity with EOl available?
4. Does the Activity comply with relevant environmental law(s) applicable to EOl?
5. Are the effects of climate change mitigation efforts me asurable and observabl ?
(e. g. , data on amount of carbon emissions avoided) . corele lament a"'63. yoars 2.

SIN Guiding Questions - EOl (Climate Change Mitigation) IB Does the Activity enable other stakeholders and/or other Activities to mitigate climate change?
I. Does the Activity help other stakeholders Unduding the community} to mitigate
climate change? (e. g. , construction of a building that facilitates urban plantingI o Does the Activity help upstream and/or downstream stakeholders to reduce their GHG emissions?
2. Does the Activity promote intersectoral collaborations for climate change
mitigation without negatively affecting other sectors?
3. How does the Activity enable other Activities to mitigate climate change? (e. g. ,
installation of power transmission and distribution equipment that enables the incorporation of solar power}
4. Are the effects of climate change mitigation efforts by the enabled Activity
measurable and observable? (e. g. , data on amount of carbon emissions avoided) Once evaluation is complete, proceed to evaluate the Activity using the separate Guiding Questions for DNSH, RMT and Mss.
3.6. Z Climate Change Adaptation Decisio Tree and Guiding Questions {E02)
An activity will meet the objective of Climate Change Adaptation if it focuses on managing actual and expected adverse consequences of climate change through evidence and relevant data regarding those effects. The activity should build resilience to mitigate and endure the physical effects of both current and future climate change. For example, to protect against sea level rise and increased flooding, communities might build seawalls or relocate buildings to higher ground. Further guidance may be obtained from the Philippines Climate Change Adaptation Strategy on potential activities. 23 Economic activities under this criterion would contribute to a reduction in material physical climate risk and/or shall reasonably reduce material physical risk from current and future climate change. This can include obvious physical risks, such as flooding, but also less immediately visible effects, such as impact on health from higher temperatures. would be Impact assessments under a broad range of climate scenarios conducted to provide better understanding and insights on the effectiveness and benefits of the Activity. 23 h :
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Activities enabling adaptation of other Activities should reduce the impact of material physical risk from other Activities and/or reduce barriers to adaptation through technology, services, or products. Activities must not adversely affect adaptation efforts, or increase the physical risk, of other stakeholders. This objective focuses on lessening the damaging effects of climate change on vulnerable people, ecosystems, and economies and raising resilience - or ensuring activities provide utility over time despite potential climate disruption. Ifthe level of contribution is judged by the assessor to be 'substantial' then it can proceed on the decision tree towards a green label, subject to meeting other requirements.
Figure 8: The E02 Climate Change Adaptation Decision Tree - E02 Decision Tree
Assessment for Classification of Activity , GIIm. to Ch. rig. Adaptation 2 Proml"g. ,10n h. rin ,A. ACUvlty Invoking the Implem, fluUon of measures to Increase the congany'E '03/11e, " to cllrn. to a. '09/4,11"g. "@n h. rin an. Activity door riot cause POLOntlul signM"n, harm to other EOS
4. Minlmum Sonl. I
cotsuard.
B. ACUvlty onebl*e coner st. kerndders
GridorActlv, U. s to
Increase I'S"lance to clbriato d"fine
3A. Activity 00 longer causes
Shrillic. in hann to other EOS 81 of assessment
28. Implem. ninthn or
ruined1.1 no'surns
.Irondy commune. d at thou I
Table 8: Guiding Questions for E02 Climate Change Adaptation
SIN Guiding Questions - E02 (Climate Change Adaptation) IA Does the Activity implement measures to increase the Company's resilience to climate change?
I. How does the Activity substantially contribute to Company's resilience a ainst
adverse physical impacts of current and future climate change? (e. g. , refurbishing infrastructure for greater resilience to impacts of sea level rise, building flood protection infrastructure to protect facilities, operation of road and rail adapted to current and future heatwaves using more heat-resistant materials during its construction) ". Company meets minimum national Econdards relating to human '19/1ts, forced labour^ emud labour and Impart on people living close to
38. GorierUUB plan ringts 10
PI. mori, reinndlal muss"re address residual hair" with 5 pars I 10 y, ars verified ^ , B, Company merits in In In"in onel standards relating to urn, n rights, loneed labour, ehlld I. hour and Impaci on people 11vlng close to Intre, bnents

SIN Guiding Questions - E021Climate Change Adaptation) o Has a climate risk assessment been conducted to establish the Activity's risk exposure towards physical climate risks? Has robust and recent climate data, projections and scenarios been use or t e assessment? o Do the results of the climate risk assessment showcase the impacts o c jinate change on the Activity? Is it a positive or negative impact? Does the Activity consider the expected future climate in its current and planne practices? Does the Activity avoid leading to an increase in the vulnerability of human or natural systems because of dimate change and climate variability- related ris s. Does the Activity avoidleading to an increased adverseimpact of the current climate and the expected future climate, on the Activity itself or on people, nature, or assets.
3. Does the Activity avoid impediments to adjusting to actual and expecte c jina e
change and its impacts?
Do the Company's policies and business strategy generally avoid contra icting or impeding alignment with the specified E02 principles? And in particular, oes it include business continuity planning?
5. Is the reduction and/or prevention of increase in climate physical risks measurable
and observable? {e. g. , data on monthly transport accidents caused by disasters against maintenance activities delivered, data on houses repaired due to noo s against budget increase for building safeguards) IB Does the Activity enable other stakeholders and/or Activities to increase resilience to climate change?
I. Does the Activity help other stakeholders (including the community) to
reduce/manage physical risks? (e. g. , provision of infrastructure to facilitate climate change adaptation of stakeholders} o Does the Activity avoid impeding upstream and/or downstream stakeholders from increasing their resilience to climate change? Does it promote intersectoral collaborations for climate change adaptation wit out negatively affecting other sectors?
3. How does the Activity enable other Activities to reduce material physical risks? (e. g. ,
removal of technological barriers to adaptation, activity which primarily provides installation of Irrigation systems and improved land drainage measures that co to reduced exposure to physical climate risks) Has a climate risk assessment been conducted on the enabled Activity's risk exposure towards physical climate risks? for the o Has robust and recent climate data, projections and scenarios been use assessment? o Do the results of the climate risk assessment showcase the impacts of climate change on the enabled Activity? Is it a positive or negative impact. Once evaluation is complete, proceed to evaluate the Activity using the separate ui ing Questions for DNSH, RMT and Mss. o 2. 4. 2 4.

3.6.3 Assessment of the Essential Criteria of DNSH, RMT and Mss
For an activity to be taxonomy aligned, the assessor should determine if the activity fulfils the following three (3) Essential Criteria:
tai Do NO Significant Harm ONSH)
Ibj Remedial Measures to Transition IRMTj IC) Minimum Social Safeguards IMSS) Following the EOS - Climate Change Mitigation and Climate Chan e Ada tation - assessment above, the assessor proceeds to the next layer of the decision tree, and assesses the Activity against each of the Essential Criteria on DNSH, RMT and Mss. An extract of the full decision tree used above reference:
Figure 9: The logic flow and decision-tree diagram for assessin essential
criteria (excerpt from Figure 8 above)
2A. Activity does not cause potential signmcant harm to other EOS 3A, Activity no longer causes significant harm to other EOS at the time of assess 2B. Implementation of remedial measures already commenced at the time or assessment 4A. Company meets minimum national standards relating to human rights, forced labour, child labour and impact on people living close I investingnts is repeated here for easier Each decision box within the decision tree in Figure 9 above contains a b' question, that the assessor will need to answer. The assessor answers 'Yes' or 'No' to the binary question based on information pertaining to the Activit be' assessed. 3B. Concrete plan exists to Implement remedial measures to address residual ham, within 5 yearsl, o years verified
Table 9: Guiding details to the decision box in the flow dia ram
Decision Box Details to Guide Decision
2A. Activity does not The Activity potentially causes harm to EOS other than the one cause potential against which it is being assessed. It is important to understand 4B. Company meets minimum national standards rela"rig to human rights, forced labour, child labour and impact on people jinng close to investrnents

Decision Box Details to Guide Decision significant harm to other the significance of the harm caused by the Activity based on the EOS. material ity of the harm to each EO. The assessor should consider whether the degree (i. e. , severity) of the harm and scale of the harm when the Activity commences (i. e. , the date of the notice to proceedI would reasonably indicate that the harm is material. The Company implementing the Activity has recognised the potential for, or the occurrence of significant harm, and has already started to implement remedial measures to reduce harm at the time of assessment 2B. Implementation of remedial measures already commenced at the time of assessment 3A. Activity no longer causes significant harm to other EOS at the time of assessment 3B. Concrete plan exists to implement remedial measures to address residual harm within 5 years, or 1.0 years on independent verification The implementation of remedial adequately mitigates/addresses the harm caused and the Activity no longer causes significant harm to other EOS. 4A/4B. The Company meets minimum national standards relating to human rights, forced labour, child labour and impact on people living dose to investments The implementation of remedial measures does not adequately mitigate or address the harm caused and as such, the Company has established concrete plans for additional remedial measures to address remaining harm within 5 years, or if the harm is not expected to be reined lated within 5 years, it obtained independent verification that it will be reined lated within 10 years' The Company has recognised the impacts of its Activity on its employees and surrounding communities, and has met national standards relating to human rights, forced labour, child labour and impact on people living close to investments.
3.6.4 Do NO Significant Harm coNSH) - Guidance and Guiding Questions
measures
Do no significant harm IDNSHj refers to the principle that an activity contributing to one EO should not cause significant harm to another EO, An activity inevitably has an impact on its surrounding environment. For example, a wind farm that is builtin a coastal area that is vulnerable to significant storm surges, may significantly harm the climate change adaptation objective if it is not reasonably designed to withstand expected climate change impacts. The DNSH assessment is a more focused approach than the previous general screening for compliance with national laws in Section 3.3 above, as it focuses solely on the potential or actual harm to another EO.

Together with the initial screening for compliance with laws, and with the Mss assessment below, they reflect an overall sustainability risk management approach. An assessment of DNSH classification of all activity ' Mandatory step t: The user will have already assessed for compliance with Philippines laws. ' Mandatory step 2: As a next step, the DNSH analysis looks at whether the activity significantly harms the other EO. In future versions, this will extend to an assessment of harm against other defined EOS. This is the core element of the DNSH assessment. ' Optional step 3: A user may assess whether the activity seeks to avoid harm to other EOS tsuch as circular economy and ecosystems and biodiversity). This is part of a broader BSG risk management approach. ' Optional step 4: A user may adopt an ESG management system approach aligned with an internationally recognised standard such as the IFC Performance Standards or the OECD Guidelines for Responsible Business Conduct. This is part of a broader ESG risk management approach. In addition, even though DNSH relates to an activity's significant harm to other EOS, an activity may also be rejected for an environmentally sustainable classification if the activity causes some direct or indirect effect which detracts from the contribution to the intended EO itself. Assessments should clearly disclose which steps were taken in the assessment. The following are general guiding questions for DNSH. One consideration as a threshold question is material ity - as a way to determine whether harm is 'significant'. This can rely to an extent on the judgment by the assessor and may be appropriate for a principles-based approach. 24 SIN 2A
Table 1.0: General Guiding Questions for DNSH
Guiding Questions ~ Do NO Significant Harm If an Environmental Impact Assessment (EIA) is required, has it been conducted and approved for the Activity? Has the Activity otherwise been assessed as material in its potential to cause significant harm?
I. What are the results of the EIA and where are the impacts of the activity?
2. Have remedial measures recommended in the EIA been implemented?
4 The International Sustainabilits, Standards Board allows a degree of judgment as to whatis 'material' by disclosing material sustainability risks on the basis that information is considered material if omitting, misstating or obscuring that information could reasonably be expected to influence dedsions that the primary users of general purpose financial reports make on the basis of those reports. Is: WWW. ifrS. 0' 11 ej atn ifrS To ejTera -SI ajii bjlj -re I n -r Ir -f r-di I - I I -r I nCl

Guiding Questions - Do NO Significant Harm
3. Regardless of whether an EIA has been conducted or not, is there any evidence
or consideration that suggests the activity could cause significant harm to the wider ecosystem Uricluding to biodiversity)?
4. Have due diligence practices of the assessor been adopted that are aligned
with the IFC Performance Standards, the Equator Principles or the World Bank Environmental, Health and Safety Guidelines? This is not a mandatory question or step; however, it may simplify the assessment process and provide alignment with international frameworks used by investors. The assessor decides which of the EO(s) could experience significant harm because of the Activity. Additional guidance is included below.
Table It: Environmental Objective Specific guiding questions for DNSH
EO Guiding Questions - DNSH
2A EOl (CC I. Does the Activity avoid significant GHG emissions, incl. CO2, CH4, N2O, SF6, Mitigation) NF, and/or HFCs (using, for example, GHG Protocol standards to support measurement)?
2. Does the Activity avoid leading to or causing extensive deforestation?
3. Does the Activity avoid impeding upstream and/or downstream
stakeholders from reducing their GHG emissions?
Does the Activity avoid leading to an increase in the vulnerability of human or natural systems (in duding on biodiversity) because of climate change and climate variability-related risks?
2. Does the Activity avoid impeding upstream and/or downstream
stakeholders from increasing their resilience to climate change?
3. Does the Activity avoid an increased adverse impact of the current climate
and the expected future climate, on the activity itself or on people, nature, or assets?
4. Does the Activity avoid impeding the adjustment to actual and expected
climate change and its impacts?
S. Does the Activity consider the expected future climate in its current and planned practices? 2A E02 (CC I. Adaptation)
3.6.5 Remedial Measures to Transition - Guidance and Guiding Questions
If an activity does cause significant harm to another EO, it is possible that it may still be taxonomy aligned, provided it has taken Remedial Measures to Transition (RMT}. RMT measures require any actual or potential significant harm to be removed or rendered insignificant.

If an assessment shows that an activity that substantially contributes to an EO is causing or may cause significant harm, the classification shall be Amber, pending effective reinediation, Any RMT should be fulfilled within a 5-year timeframe from the assessment date, or an independent verification supports a claim that reinediation will take 10 years or less. Any expected reinediation beyond 5 years without independent verification, or beyond 10 years is not eligible for the Amber category and will be classified as Red. The following guidance applies regarding the independent verifier:
tai The independent external reviewer must assess and verify the credibility of the reinediation timeline and plan confirming a maximum of 10 years to reinediate, with specification of the expected number of years (for example, with limited or reasonable assurance and where feasible, with reference to other reinediation benchmark timeframes and any Philippine Environmental Impact System requirements). Ib) The reviewer should have relevant expertise. (c) The reviewer must disclose their relevant credentials and expertise and the scope of the verification conducted in an assurance report. Comprehensive and realistic plans for RMT must be presented as part of the assessment. If significant harm is occurring or will occur, and RMT is not planned to be completed within the specified timeframe, the Activity is automatically classified as Red. RMT may refer to the Philippines' Environmental Impact Assessment System as reference on practices imposing time limits. A series of guiding qualitative questions is outlined below to assess whether significant harm has been or would be caused and remedial measures are or would be taken. Assessors are expected to encourage, support, and take into account the remedial efforts of businesses to align their operations with a low-carbon and climate resilient economy. Financial institutions can play a particularly important role in encouraging MsMEs to consider their business activities and plans to align their operations.

SIN
2B
Table 12: Guiding Questions for RMT
Guiding Questions - RMT
Have remedial measures already started to belmplemented at the time of assessment?
I. Does the Activity reinediate risk and impacts through e. g. , compliance with
relevant (national) environmental law{s), internal policies and processes, implementation of additional measures that reduce harm? For example, is there an Environmental and Social Action plan in place with milestones, timelines, and measure to ensure and disclose compliance?
2. What are these proposed actions and their contributions to reinediation (e. g. ,
avoidance, minimisation, reduction)?
3. Is there available technology for this Activity in place for compliant risk
management measures against the adverse effects of climate change?
4. If the Activity is new and has yet to commence, consider whether there are
planned remedial measures already in place to address the potential harm. Does the Activity no longer cause significant harm to other EOS at the time of assessment?
I. If the answer is no, there is still 'residual harm', which refers to any harm that
remains even after compliance with the relevant environmental laws and Company's processes and policies, as well as implementation of any other measures on top of compliance, then go to 3B. Are there concrete plans established for remedial measures to address the residual harm within a defined timeframe?
I. Do the planned remedial measures fallwithin 5 years? Iflonger than 5 years and
up to 10 years, is there independent verification of the credibility of the longer timerraine for example, by reference to similar benchmark projects?
2. What is the expected output for results of tracking and monitoring (e. g. , annual
reports, sustainability reports, other publications)?
3. Are the remedial measures and assessments done appropriate/proportionate to
the business' scale of operations and industry benchmarks?
4, Who are the direct stakeholders involved in the Activity's supply chain? What are these proposed actions and their contributions to reinediation (e. g. , avoidance, minimisation, reduction)? 3A 3B
3.6.6 Minimum Social Safeguards - Guidance
Minimum Social Safeguards IMSS) are the standards to ensure that the entities doing the activities comply at a minimum with Philippines social regulatory requirements. This assessment is done at the company level as opposed to the activity level, Applying this principle ensures that the activity achieving an Environmental Objective is riot done while harming a social aspect thus promoting conduct for responsible business.

The following constitute the Mss:
tai Promotion and protection of human rights Compliance with the Philippines laws on human rights, labor rights, corruption, fair competition, the Constitution, and international conventions ratified by the Philippines. (b) Prevention of forced labour and protection of children's rights Philippines laws including exploitation, trafficking in persons, violence, and abuse, as well as the core ILO conventions ratified by the Philippines 25. For example, this may include specific laws regarding employment of industrial homeworkers under DOLE 1974 and may be implied under other laws regarding confiscation of identity documents of migrant workers' Additionally, entities must comply with any nationally adopted laws under the ASEAN Declaration on the Protection of the Rights of Migrant Workers and the ASEAN Consensus on the Protection and Promotion of Rights of Migrant Workers (ASEAN, 2012). Impact on People living Close to Investments As companies undertake new investments, they must ensure targeted measures are taken to reduce the impact of those investments on vulnerable populations and the people affected. Given this, companies in the Philippines carrying out activities within ancestral domains/lands are required to undergo a free and prior informed (FPIC) with indigenous consent process cultural communities/indigenous peoples as part of the meaningful stakeholder consultation requirements (FAO, 2006), Entities must also comply with other national laws such as any adopting the ASEAN Declaration on Strengthening Social Protection IASEAN, 2013). For example: (i) improved or restored livelihood and standard of living e. g. , for displaced persons and for local household aji improved living conditions for physically displaced persons through the provisions of adequate housing with securities of tenure at resettlement sites (iii) promoting sustainable development benefits and opportunities for indigenous peoples in a cultural Iy appropriate manner. A non-exhaustive list of regulations pertaining to social aspects for the Philippines are listed in Appendix I. . A list of ILO ratf'cations is found here. tt WW o d n norm!e en ? =1.00 11 00 11

The boundary of Mss coverage is as follows:
a. The Mss assessment will cover the immediate Company carrying out the Activity as well as branches/subsidiaries (if any) that are directly involved in carrying out the Activity, without which the Activity cannot be carried The adherence to the Mss of suppliers and subcontractors directly involved in carrying out the Activity, without which the Activity cannot be carried out, e. g. , through signing a Code of Conduct. The Company should refer to national legislation and regulations of the country in which the organisation (e. g. , corporate or branch/subsidiaryj is based. Out, For example, if the immediate Company carrying out the Activity is based in the Philippines, but its subsidiary is based in Indonesia, then the assessment will be done with reference to Philippine legislation and regulations for the Company, while Indonesia legislations and regulations will be referenced for the subsidiary, Not meeting national legislation and thus failing the Mss assessment leads to a 'Red' classification. If a Company is found or known to have an unsatisfactory track record (due to violations or breaches) in at least one of the social safeguards outlined above, the Company will still be allowed to undergo the Mss assessment; but as an additional requirement, it has to prove that its relevant processes (where violations or breaches have occurred) have improved and reinediation processes were implemented to prevent a repeat of violation or breach. Data on a Company's violations and breaches of the Mss may be collected through publicly available sources tsuch as controversy and adverse media screenings), but it is ultimately up to the Company's discretion to voluntarily disclose such violations or breaches. The summary of guiding questions for the EOS and Essential Criteria on DNSll, I^MT and Mss is provided in Appendix 2. Sample use cases on climate change mitigation and adaptation are provided in Appendices 3 and 4, respectively.
3.7 External verification and use of Industry Standards
Except for the mandatory external verification for remedial measures to address harm in the Amber category, assessors can, but are not required to use third-party verifications or recognised certifications by local agencies, national

authorities, or international accreditation bodies to inform their internal screening and assessment process. External verifiers can give investors comfort regarding the status of an activity's alignment with a taxonomy, for example, regarding a capital markets transaction. The external verifier process includes but is not limited to engagement planning, pre-assessment preparation, on-site or remote assessment, data collection and analysis, verification reporting, feedback and validation, recommendations and corrective actions, communication of results and continuous monitoring. When assessing contribution to EOS, DNSH, RMT and Mss, verifiers, for example, can assess the company's internal reined Iation processes add/or mechanisms against a range of industry standards and certifications. Reference to a non-exhaustive list of associated international standards and certifications as benchmarks when dealing with the relevant sustainability gaps is outlined in the Appendix 5 of this document. These include industry standards and certifications which may be particularly relevant to MsME's, taken from the IFC Sustainable MsME Finance Reference. 26 Sustainability reporting disclosures, issued by the SEC relating to Publicly Listed Companies and by the BSP in relation to BSP-supervised financial institutions, and internationally recognised disclosure standards may also assist in providing evidence of Company practices.
3.8 Assessment of Exposures to MsMEs
Micro, small, and medium enterprises (MsMEs) in the Philippines, comprising
99.59 percent (1,105,143y' of the total 1,109,684 business enterprises in
20222B, continue to be a significant source of revenue for the country, with a 40 percent contribution to the country's GDP29. Around 87 percent of the total MsMEs are distributed across the following top five industry sectors, namel :
(1) Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles; (2) Accommodation and Food Service Activities; (3) Manufacturing; (4) Other Service Activities; and (5) Financial and Insurance Activities. 30 https://WWW. lit. org/content/darn/lit/doclink/2023/5ustainable-msme-finance-reference-guide-ifc-2023. pdf Micro, small, and medium enterprises constitute 90.49 percent, 8.69 percent. and 040 percent of the total establishments, respectively. UNDP 2020 report I

Because of their limited size and resources, MsMEs also heavily bear the negative effects of climate change in their respective businesses. Climate change risks and natural hazards have an impact on the continuity of business operations of MsMEs, and on the health and safety of their employees' Meanwhile, the aggregate global environmental footprint of SMEs contributes around 60-70 percent to industrial emissions. 31 Initiatives to promote sustainable finance and efforts to address climate change should be inclusive and should not result in unintended consequences at the disadvantage of the vulnerable sector, that includes the MsMEs. MsMEs provide 65.1 percent of the total employment 32 in the Philippines and can therefore substantially contribute to strengthening the country's resilience to climate change. 33 MsMEs can likewise support climate change mitigation by transitioning to renewable energies, adopting green technology for sustainable production, and contributing to the low-carbon value chain. Given this, the SFTG can be a tool to channel funds to MsMEs climate change mitigation or adaptation efforts to make their businesses climate smart and environment￾friendly. Assessment of MsMEs' Activities Given the diversity of MsMEs, this SFTG intends to provide a simplified approach for the assessment of their activities or projects. The approach shall be periodically reviewed and updated to reflect developments in the sustainable finance space. First, the activity must not be considered as an "excluded" activity and is compliant with national laws, rules, and regulations, consistent with
Section 3.
Second, financing an activity should align with an appropriate Use of Proceeds (UOP) standard. Samples of certifications and activities/ projects35 that can be considered as eligible sustainable UOP for MsME financing are provided in Appendices 5 and 6. I 2litt : WWW. d '. ov I re ui' n Ie. S a ' tic 3 Climate information for climate change adaptation. 2018. Hoedjes, Miller & Usher. United Nations Environment Programme & Technical University of Denmark IUNEP DTU). Available at:
WWWr Tr11 in I' iI 4 P' r 'nin 11t I I 'I' 1/1 d' ^ r t t : w^, w. a I- I .or w -coll nr u o us 220 07 AFI S EF ICF SMES AW in it I O. of 5IFC Sustainable MsME Finance Reference Guide Ichapter 111. Eligible sustainable MsME Use of Proceedsj h 11i W r \vl h -lid- I V. W n￾11

• r

Third, if an appropriate UOP cannot be identified, the activity should be assessed following the "traffic light" classification system provided in
Section 3.4 and the assessments from Sections 3.5-3.7.
An MsME's activity may achieve appropriate green or social standards as assessed by an independent third party as referenced in Section 3.7. Environmental-focused international sustainable certifications and standards obtained by the MsME provide assurance that the processes and ractices of the MsME do not constitute significant harm to other environmental ob'ectives. These certifications may include, but are not limited to, Rainforest Alliance Certification, Forest Stewardship Council Certification, Fairtrade Certification, Sustainable Rice Platform, Sustainably Grown, etc. (as outlined in Appendix 5). National or local government environmental clearances may also be considered in the assessment. However, these certifications and clearances should be complemented by sound judgment and some form of assessment by the bank/finance provider concerned to check for evidence or consideration that suggests the activit could make a significant contribution to an environmental objective and does not cause significant harm to the wider ecosystem (including to biodiversity) or if the MsME has the capability to conduct the activity that will not cause significant harm. This may include, checking publicly available data on possible environmental violations or negative records attributable to the MsME. They may also conduct interviews with the borrower/activity proponent using the guiding questions, but this does not preclude banks/finance providers from adopting additional questions that may draw the needed information from the MsME SIon as th's inf rinati ncan ere onab rov'dedf b th MsM
Figure 10: Decisio, ITree for Assessing MsME Activity
MsME
Activity for
Financing
Aligned with appropriate
UOP standard
Assess under
SFTG Amber

Appendix L: Non-Exhaustive List of Laws for Minimum Social Safeguards
Respect human rights
Prevention of forced and child labor
. Constitution of the Philippines
Expanded Anti-Trafficking in Persons Act of 2012 IR. A.
No. 10364}
Anti-Trafficking of Persons Act, 2003 (R, A. No. 9208j Department Order No. 149~A of 2017 amending the Guidelines on Assessing and Determining Hazardous Work in the Employment of Persons Below the Age of 18 Years Department Order No. 149 of 2016 on the Guidelines on Assessing and Determining Hazardous Work in the Employment of Persons Below the Age of 18 Years Expanded Anti-Trafficking in Persons Act of 2012 (R. A, No. 10364) Special Program for Employment of Students (R. A. No. 9547) Rules and Regulations implementing R. A. No. 9231, Amending R. A. No. 7610, as amended IDepartment Order 65-04) Department Order No. 04 on hazardous work and activities to persons below 18 years of age Department Order No. 18 of 12 May 1,994 on Rules and Regulations implementing R. A. No. 7658 Act prohibiting the employment of children below 15 years of age in public and private undertakings, amending for this purpose Section 12, Article Vlll of R. A, No. 7610 (R. A. No. 7658j Rules implementing R. A. No. 6727 (Wage Rationalization Act) List of Hazardous Occupations to Young Workers, 1973 (Department Order No. 41 Department Order No. 5. Rules XIV of the Rules Implementing Booklll of the Labor Code on Employment of Homeworkers, 1992

Impact on people living close to investments Child and Youth Welfare Code Special Protection Against Child Abuse, Exploitation and Discrimination Amendment Act (R. A No. 9231) Executive Order No. 310 authorizing the adoption and implementation of the Philippine National Strategic Framework for plan development for children, 2000- 2025 Proclamation No. 855 proclaiming the adoption and implementation of the Philippine Program of Action for Children in the 1990s Department of Natural Resources and Environment Administrative Order No. 30 Series of 2003 Indigenous Peoples' Rights Act 1997 Source: Annex 5 to the ASEAN Taxonomy for Sustainable Finance Version 2 - social regulations by ASEAN Member State

Appendix 2: Compilation of Guiding Questions
Objectives (EOS) and Essential Criteria (EC) EOl. - CLIMATE CHANGE MITIGATION Step 0.1 0.2 IA Processes Is the Activity an Excluded Activity? Is the Activity in compliance with Philippine laws? Does the Activity contribute to Climate Change Mitigation? Guidrng Questions:
Does the Activity avoid reduce GHG emissions, I, How does the Activity substantially avoid or help reduce emissions? . Does the Activity avoid locking in high-carbon activity? Is it delaying or preventing the transition towards low carbon alternatives? . Does the Activity avoid leading to substantial GHG emissions, including CO2, CH4, N2O, SF6, NF3 and/or HfCs? . Does the Activity avoid leading to or causing extensive deforestation practices?
2. Do the Company's policies and business strategy generally avoid
contradicting or impeding alignment with the specified EOl principles?
3. Where applicable and relevant is a 3rd party certification or
verification of alignment of Activity with EOl available?
4. Does the Activity comply with relevant environmental law(s)
applicable to EOl?
S. Are the effects of dimate change mitigation efforts measureble and observable? (e. g. , data on amount of carbon emissions avoided) for Environmental Re e ei, ce 3.2 3.3
3.6. I
(Table 7)
IB Does the Activity contribute to Climate Change Mitigation? Guid, hg Questions:
Does the Activity enable other stakeholders and or other Activities to mitigate climate change,
I. Does the Activity help other stakeholders (including the
community) to mitigate climate change? (e. g. , construction of a building that facilitates urban planting) . Does the Activity help upstream and/or downstream stakeholders to reduce their GHG emissions?
2. Does the Activity promote intersectoral collaborations for climate
change mitigation without negatively affecting other sectors?
3. How does the Activity enable other Activities to mitigate climate
change? (e. g. , installation of power transmission and distribution equipment that enables the incorporation of solar power)
3.6. I
(Table 7j

tP
4. Are the effects of dimate change mitigation efforts by the enabled
Activity measurable and observable? (e. g. , data on amount of carbon emissions avoided) EC, . Do NO SIGNIFICANT HARM 2A Activity does not cause potential significant harm to other EOS. Generol Guiding Questions:
If an Environmental Impact Assessment (EIA} Is required, has it been conducted and approved for the Activity? Has the Activity otherwise been assessed as material in its potential to cause significant harm? . What are the results of the EIA and where are the impacts of the activity? . Have remedial measures recommended in the EIA been implemented? . Regardless of whether an EIA has been conducted or riot, is there any evidence or consideration that suggests the activity could cause significant harm to the wider ecosystem Uricluding to biodiversityj? . Have due diligence practices of the assessor been adopted that are aligned with the IFC Performance Standards, the Equator Principles or the World Bank Environmental, Health and Safety Guidelines? This is not a mandatory question or step; however, it may simplify the assessment process and provide alignment with international frameworks used by investors. cesses Rel^reinc 2A EO-specific guiding questions (assessing against E02 Climate Change Adaptation:
3.64
(Table I O)
. Does the Activity avoid leading to an increase in the vulnerability of human or natural systems Uricluding on biodiversity) because of climate change and climate vanability-related risks? Does the Activity avoid impeding upstream and/or downstream stakeholders from increasing their resilience to climate change? Does the Activity avoid an increased adverseimpact of the current dimate and the expected future climate, on the activity itself or on people, nature, or assets? Does the Activity avoid impeding the adjustment to actual and expected climate change and its impacts? Does the Activity consider the expected future climate in its current and planned practices? EC2 2B REMEDIAL MEASURES To TRANSITION Have remedial measures already started to be implemented at the time of assessment? 3.6.4 (Table In 3.6.5 (Table 12) 49

aC SS
Does the Activity reinediate risk and impacts through e. g. , compliance with relevant (national) environmental law(s), internal policies and processes, implementation of additional measures that reduce harm? For example, is there an Environmental and Social Action plan in place with milestones, timelines, and measure to ensure and disclose compliance? What are these proposed actions and their contributions to reinediation (e. g. , avoidance, minimization, reduction)? Is there available technology for this Activity in place for compliant risk management measures against the adverse effects of climate change? If the Activity is new and has yet to commence, consider whether there are planned remedial measures already in place to address the potential harm. Does the Activity no longer cause significant harm to other EOS at the time of assessment? . If the answer is no, thereis still 'residual harm', which refers to any harm that remains even after compliance with the relevant environmental laws and Company's processes and policies, as well as implementation of any other measures on top of compliance, then go to 38. Refe Are there concrete plans established for remedial measures to address the residual harm within a defined timefi. ame? o Do the planned remedial measures fallwithin 5 years? Iflonger than 5 years and up to 10 years, is there independent verification of the credibility of the longer timeframe for example, by reference to similar benchmark projects? . Whatis the expected output for results of tracking and monitoring (e. g. , annual reports, sustainability reports, other publications)? . Are the remedial measures and assessments done appropriate/proportionate to the business' scale of operations and industry benchmarks? . Who are the direct stakeholders involved in the Activity's supply chain? What are these proposed actions and their contributions to reined Iation Ie. g. , avoidance, minimization, reduction)? rice EC3 MINIMUM SOCIAL SAFEGUARDS Does the company comply with relevant laws, rules, and regulations, which include the following 3.6,5 erable 12) . Promotion and protection of human rights 3.6.5 erable 12)

Sep Getsses

Compliance with the Philippines laws on human rights, labor
rights, corruption, fair competition, the Constitution, and international conventions ratified by the Philippines. Prevention of forced labour and protection of children's rights
Philippine laws including exploitation, trafficking in persons,
violence, and abuse, as well as the core ILO conventions ratified by the Philippines. For example, this may include specific laws regarding employment of industrial homeworkers under DOLE 1974 and may be implied under other laws regarding confiscation of identity documents of migrant workers' Additionally, entities must comply with any nationally adopted laws under the ASEAN Declaration on the Protection of the Rights of Migrant Workers and the ASEAN Consensus on the Protection and Promotion of Rights of Migrant Workers (ASEAN, 2012), Impact on People living Close to Investments
As companies undertake new investments, they must ensure
targeted measures are taken to reduce the impact of those investments on vulnerable populations and the people affected. Given this, companies in the Philippines carrying out activities within ancestral domains/lands are required to undergo a free and prior informed consent (FPIC) process with indigenous cultural communities/indigenous peoples as part of the meaningful stakeholder consultation requirements (FAO, 2006). Entities must also comply with other national laws such as any adopting the ASEAN Declaration on Strengthening Social Protection IASEAN, 2013}. For example:
I. improved or restored livelihood and standard of living
e. g. , for displaced persons and for local household

11. improved living conditions for physically displaced
    persons through the provisions of adequate housing with securities of tenure at resettlement sites promoting sustainable development benefits and opportunities for indigenous peoples in a culturalIy appropriate manner. Reference E02 - CLIMATE CHANGE ADAPTATION 111 . Se 0.1 0.2 IA Is the Activity an Excluded Activity? Is the Activity in compliance with Philippine laws? Does the Activity contribute to Climate Change Adaptation? roce es Refe 3.2 3.3 3.6.2 (Table 8j ce

Guiding Questions:
Does the Activity implenient measures to increase the Company s resilience to climate change?
I. How does the Activity substantially contribute to Company s
resilience against adverse physical impacts of current and future climate change? (e. g. , refurbishing infrastructure for greater resilience to impacts of sea level rise, building flood protection infrastructure to protect facilities, operation of road and rail adapted to current and future heatwaves using more heat-resistant materials during its construction) . Has a climate risk assessment been conducted to establish the Activity's risk exposure towards physical climate risks? . Has robust and recent climate data, projections and scenarios been used for the assessment? . Do the results of the climate risk assessment showcase the impacts of climate change on the Activity? Is it a positive or negative impact? . Does the Activity consider the expected future climate in its current and planned practices? . Does the Activity avoid leading to an increase in the vulnerability of human or natural systems because of dimate change and climate variability- related risks?
2. Does the Activity avoid leading to an increased adverse impact of
the current climate and the expected future climate, on the Activity itself or on people, nature, or assets?
3. Does the Activity avoid impediments to adjusting to actual and
expected climate change and its impacts?
4. Do the Company's policies and business strategy generally avoid
contradicting or impeding alignment with the specified E02 principles? And in particular, does it in dude business continuity planning?
5. Is the reduction and/or prevention of increase in climate physical
risks me asurable and observab!e? (e. g. , data on monthly transport accidents caused by disasters against maintenance activities delivered, data on houses repaired due to floods against budget increase for building safeguards}? rigesses Refierenee IB Does the Activity contribute to Climate Change Adaptation? Gutdin9 Questions:
Does the Act, v, ty enable other stakeholders and/or Activities to Increase resilience to climate change?
I. Does the Activity help other stakeholders (including the
community) to reduce/manage physical risks? (e. g. , provision of 3.6.2 (Table 8)

Step infrastructure to facilitate climate change adaptation of stakeholders) . Does the Activity avoid impeding upstream and/or downstream stakeholders from increasing their resilience to climate change?
2. Does it promote intersectoral collaborations for climate change
adaptation without negatively affecting other sectors?
3. How does the Activity enable other Activities to reduce material
physical risks? (e. g. , removal of technological barriers to adaptation, activity which primarily provides installation of irrigation systems and improved land drainage measures that lead to reduced exposure to physical climate risks)?
4. Has a climate risk assessment been conducted on the enabled
Activity's risk exposure towards physical climate risks?
. Has robust and recent climate data, projections and scenarios been used for the assessment? . Do the results of the climate risk assessment showcase the impacts of climate change on the enabled Activity? Is it a positive or negative impact? ECl 2A Do NO SIGNIFICANT HARM Activity does not cause potential significant harm to other EOS. Reference General Guiding Questions. . If an Environmental Impact Assessment IEIA) Is required, has It been conducted and approved for the Activity? Has the Act. vity otherwise been assessed as material in Its potential to cause significant harm? . What are the results of the EIA and where are the impacts of the activity? . Have remedial measures recommended in the EIA been implemented? o Regardless of whether an EIA has been conducted or not, is there any evidence or consideration that suggests the activity could cause significant harm to the wider ecosystem (including to biodiversity)? . Have due diligence practices of the assessor been adopted that are aligned with the IFC Performance Standards, the Equator Principles or the World Bank Environmental, Health and Safety Guidelines? This is not a mandatory question or step; however, it may simplify the assessment process and provide alignment with international frameworks used by investors, EO-specific guiding questions (assessing DNSH to EO I. - Climate Change Mitigation):
3.6.4
(Table 10)
3.6.4
(Table 1/1
53

Step
. Does the Activity avoid significant GHG emissions, incl. CO2, CH4, N2O, SF6, NF3 and/or HFCs (using, for example, GHG Protocol standards to support measurement)? Does the Activity avoid leading to or causing extensive deforestation? Does the Activity avoid impeding upstream and/or downstream stakeholders from reducing their GHG emissions? EC2 2B REMEDIAL MEASURES To TRANSITION Have remedial measures already started to be implemented at the time of assessment? . Does the Activity reinediate risk and impacts through e. g. , compliance with relevant coational) environmental law(SI, internal policies and processes, implementation of additional measures that reduce harm? For example, is there an Environmental and Social Action plan in place with milestones, timelines, and measure to ensure and disclose compliance? . What are these proposed actions and their contributions to reined tation (e. g. , avoidance, minimization, reduction}? . Is there available technology for this Activity in place for compliant risk management measures against the adverse effects of climate change? . If the Activity is new and has yet to commence, consider whether there are planned remedial measures already in place to address the potential harm Reference 3A Does the Activity no longer cause significant harm to other EOS at the time of assessment? . If the answer is no, thereis still 'residual harm', which refers to any harm that remains even after compliance with the relevant environmental laws and Company's processes and policies, as well as implementation of any other measures on top of compliance, then go to 3B, 3B 3.65 erable 12) Are there concrete plans established for remedial measures to address the residual harm within a defined timeframe? . Do the planned remedial measures fall within 5 years? If longer than 5 years, is there independent verification of the credibility of the longer timeframe for example, by reference to similar benchmark projects? . Whatis the expected output for results of tracking and monitoring leg, annual reports, sustainability reports, other publications)? 3.65 {Table 12) 36.5 (Table 12)

sp
. Are the remedial measures and assessments done appropriate/proportionate to the business' scale of operations and industry benchmarks? Who are the direct stakeholders involved in the Activity's supply chain? What are these proposed actions and their contributions to reinediation Ie. g. , avoidance, minimization, reduction)? EC3 MINIMUM SOCIAL SAFEGUARDS Does the company comply with relevant laws, rules, and regulations, which include the following Processes Promotion and protection of human rights

Compliance with the Philippines laws on human rights, labor
rights, corruption, fair competition, the Constitution, and international conventions ratified by the Philippines. Prevention offorced labour and protection of children's rights
Philippine laws in duding exploitation, trafficking in persons,
violence, and abuse, as well as the core ILO conventions ratified by the Philippines. For example, this may include specific laws regarding employment of industrial homeworkers under DOLE 1974 and may be implied under other laws regarding confiscation of identity documents of migrant workers' Additionally, entities must comply with any nationally adopted laws under the ASEAN Declaration on the Protection of the Rights of Migrant Workers and the ASEAN Consensus on the Protection and Promotion of Rights of Migrant Workers (ASEAN, 2012). Impact on People living Close to Investments
As companies undertake new investments, they must ensure
targeted measures are taken to reduce the impact of those investments on vulnerable populations and the people affected. Given this, companies in the Philippines carrying out activities within ancestral domains/lands are required to undergo a free and prior informed consent (PPIC) process with indigenous cultural communities/indigenous peoples as part of the meaningful stakeholder consultation requirements (FAO, 2006). Entities must also comply with other national laws such as any adopting the ASEAN Declaration on Strengthening Social Protection (ASEAN, 2013). For example:
in improved or restored livelihood and standard of living e. g. , for displaced persons and for local household tit) improved living conditions for physically displaced persons through the provisions of adequate housing with securities of tenure at resettlement sites Re reince

Step
.
Processes
(Iii) promoting sustainable development benefits and opportunities for indigenous peoples in a culturalIy appropriate manner. Refere, ,ce

Appendix 3: Use Cases on Climate Change Mitigation 36
,. Cllm. 10 Chang.
MIUgatlon a. Promltlg. lion h. "n a. Post, nltlg. "on h. rin an Activity done tit cause patsnti. I "19n", cunt harm to other EOS 4 Minlmum 5001. I S. fogu, ,dB ,a. Activity, Dab^ other Etakehold, rs under Activities to minus, . elmab 3, . AdMty rin longer Gauges 519nl"cant harm to char EOS alitio "me or assess, ,"n, Example I: Hydropower my. E minim^ n. I standard. relating ,o human tohts. IDE"d I. hour, child labour and impart on people living clogo to already coma"riced at 0.0 titr, o or assessrrnnt Background An electricity utility company that is involved in power generation and the transmission and distribution of electricity to its customers is raising long-term capital for a 300MW hydropower plant. The company intends to issue a long-term financial instrument e. g. , labelled bonds to increase support the financing of the hydropower plant.
38. Concrete plan o. 15ts to
Impl, rne"Ironed 1.1 neourns to .ddr". residual h within 5 years I to years v Setting the Environmental Objective Threshold question for the Entity/Issuer:
. Which of the Environmental Objectives is most relevant to the activity? . Whatis the strategic focus of the company doing the activity? o Which environmental objective is most aligned with the company's strategic focus? mud, mint, nun 11,110, "Island. r's rob"rig to bun"n rights, breed Cabo"r. child labour. r" Imp. of on 11vlng clog. to Answer In determining the primarily environmental objective, the renewable energy hydropower project should align with the strategic focus of the Company which mitigates climate risks i. e. , by substantially reducing GHG emissions and by generating the abundance of hydropower. The economic activities of reducing GHG emissions meet one of the environmental objectives i. e. , climate change mitigation. Adapted from case studies developed in the SRI Taxonomy for the Malaysian Capital Market.

Step
0.1 Is the Activity an Excluded Activity?
No, the activity is not in the excluded activity list.
Is the Activity in compliance with Philippine laws?
The Activity complies with Philippine laws.
Does the Activity contribute to Climate Change Mitigation?
. Does the Activity avoid I reduce GHG emissions? How does the Activity substantially avoid or help reduce emissions? Implementing a hydropower project shifts the fossil fuel-based emissions to a renewable source of emissions. cesses Does the Activity contribute to Climate Change Mitigation? . Does the Activity enable other stakeholders and/or other Activities to mitigate climate change? EC, . 2A Not relevant as an enabling activity. Do NO SIGNIFICANT HARM Activity does not cause potential significant harm to other EOS. . Has the Activity been assessed as material in its potential to cause significant harm? . Is the economic activity harmful to the healthy condition of ecosystems and biodiversity, including threatening the protection and conservation of natural areas, habitats, and species? . Does the Activity avoid leading to or causing extensive deforestation? The construction of hydropower plant of this size requires inundation of alargeland area which may cause significant harm, if poorly managed due to the impact on biodiversity, as well as causing methane emission, which is a GIIG emission with high global warming potential. The company will mitigate GHG emissions from the inundation of a largeland area by applying global best practices in hydropower plant development by meeting a power density of more than 5W/in2 and a GHG emissions intensity of less than 50g CO2e/kWh. EC2 2B REMEDIAL MEASURES To TRANSITION Have remedial measures already started to be implemented at the time of assessment? . Has implementation of remedial measures been taken orimplemented at the point of assessment?

S P Proce S
No remedial measures have been implemented at the point of assessment Are there concrete plans established for remedial measures to address the residual harm within a defined timeframe? . In the absence of implementing remedial measures at the point of assessment, does it have credible remedial plans to mitigate the residual harm (for implementation and completion) within a period of five (5) years or an independent verification supports a claim that reinediation will take less than 10 years, How does the business propose to minimize or eliminate the effects of its activity on the ecosystem and biodiversity and whether this can be reined lated within the stipulated period? The residual harm will be mitigated within the stated period, and with external verification, through global best practices in hydropower plant development by:

conducting Hydropower Sustainability Assessment Protocol (HSAP) and the
Hydropower Sustainability ESG Gap Analysis Tool IHESG) that are developed through a collaborative forum comprising the International Hydropower Association (IHA), The Nature Conservancy, The World Bank Group and The World Wide Fund for Nature (my Fir and
addressing the gaps identified through an Environmental and Social Action
Plan (ESAP).
EC3 MINIMUM SOCIAL SAFEGUARDS
. Does the entity comply with the SFTG minimum social safeguards? Does entity comply with relevant laws, rules and regulations which includes promotion of human rights, prevention of forced labor and protection of children's rights? Traffic light classification: The activity is considered AMBER. Yes, the entity meets the SFTGS Mss. Example 2: Floating solar power plant Background A forward-thinking company is dedicated to revolutionizing the renewable energy landscape through innovative and sustainable solutions. With a focus on harnessing the power of the sun, the company is at the forefront of the floating solar power industry. The company specializes in designing, implementing, and operating state-of-the-art floating solar power plants, contributing to a cleaner and more resilient energy future. The company intends to expand their floating power plant to contribute to renewable energy transition and obtain bank and capital market financing to support its projects.

Setting the Environmental Objective
Threshold question for the Entity/Issuer:
. Which of the Environmental Objectives is most relevant to the activity? . Whatis the strategic focus of the company doing the activity? . Which Environmental Objective is most aligned with the company's strategic focus? Answer:
The company's strategic focus is sustainability, clean energy, and environmental responsibility. The company emphasis on reducing carbon emissions, hence the Environmental Objective Mitigation is most suitable for the activity. 0.1 Processes:
Is the Activity an Excluded Activity?
No. the activity is riot in the excluded activity list.
0.2 Is the Activity in compliance with Philippine laws?
The Activity complies with Philippine laws Does the Activity contribute to Climate Change Mitigation? . Does the Activity avoid I reduce GHG emissions? How does the Activity substantially avoid or help reduce emissions? While production of the materials to produce the solar plant produces emissions, the end product is renewable energy generation, which is lower than fossil fuel energy generation. The economic activity meets one of the environmental objectives on climate change mitigation by avoiding GHG emissions (EOl). Does the Activity contribute to Climate Change Mitigation? . Does the Activity enable other stakeholders and/or other Activities to mitigate climate change? EC, . 2A Not relevant as an enabling activity, Do NO SIGNIFICANT HARM Activity does not cause potential significant harm to other EOS. . Has the Activity been assessed as material in its potential to cause significant harm? Is the economic activity harmful to the healthy condition of ecosystems and biodiversity, including threatening the protection and conservation of natural areas, habitats, and species? (Additional). Does the Activity avoid leading to or causing extensive deforestation?

PI'DCCSSes:
TechnicalIy, the only mandatory DNSH assessment is against E02 in this phase of the SFTG, However, the entity has optional Iy taken into consideration potential harm in respect of biodiversity and to ensure resilience of the project against physical risks of dimate change adaptation. The company has followed the Philippine Environmental Impact Assessment System processes. It does not cause significant harm to other environmental objectives triotably climate change adaptation) as best practices are applied including conduct of site environmental impact assessment prior to project construction and implementation of health, safety and environmental policies during the operations and maintenance stage, and an assessment of the vulnerability of the solar plant to physical risks from climate change has been found to be low. They have been engineered to withstand significance rises and falls in water levels as well as strong winds and heavy rain. In fact, they have found to be a potential emergency source of power in the event of land-based impacts of a disaster disrupting terrestrial power sources. An assessment of the biodiversity of the area has been conducted and the proposed design of the solar power plant has been found to present low risks to biodiversity in the area of coverage as it is being constructed on a previously human-made reservoir. EC2 EC3 REMEDIAL MEASURES To TRANSITION ~ NOT APPLICABLE MINIMUM SOCIAL SAFEGUARDS . Does the entity comply with the SFTG minimum social safeguards? Traffic-light Classification: The economic activity is classified as GREEN. Yes, meet the SFTGS Mss. Example 3: Biogas Power Plant Background A dynamic and innovative company at the forefront of sustainable energy solutions, with a strong commitment to environmental responsibility and a focus on harnessing the potential of biogas. The company is dedicated to transforming organic waste into a clean and renewable source of energy. The company plan to implement biogas power plant project, providing clean energy solution to local communities and industries. This projectinvolves the construction and operation of facilities that harness biogas through ariaerobic digestion process, ensuring a closed-loop system that maximise energy efficiency.

Setting the Environmental Objective
Threshold question for the Entity/Issuer:
. Which of the Environmental Objectives is most relevant to the activity? . Whatis the strategic focus of the company doing the activity? . Which Environmental Objective is most aligned with the company's strategic focus? Answer The strategic focus of the company is providing sustainable solutions through conversion of organic waste into biogas. Implementing waste-to-energy projects that align with circular economy projection. As the primary driver for the company's biogas power plant projects, mitigating climate change through the reduction of greenhouse gas emissions directly aligns with the strategic focus on providing sustainable energy solutions. Processes:
Is the Activity an Excluded Activity?
No. the activity is not in the excluded activity list.
0.2 Is the Activity in compliance with Philippine laws?
The Activity complies with Philippine laws.
Does the Activity contribute to Climate Change Mitigation?
. Does the Activity avoid I reduce GHG emissions? How does the Activity substantially avoid or help reduce emissions? The economic activity meets the environmental objectives on climate change mitigation by reducing GHG emissions (EOl). It captures methane produced from palm oil mill effluent (POME) and is expected to remove 80 percent of GHG emissions that will be emitted from POME ineft untreated, Does the Activity contribute to Climate Change Mitigation? . Does the Activity enable other stakeholders and/or other Activities to mitigate climate change? ECl. 2A Not relevant as an enabling activity. Do NO SIGNIFICANT HARM Activity does not cause potential significant harm to other EOS, POME is a by-product of the palm milling process. It does not cause significant harm to other environmental objectives as best practices are applied including the conduct of site environmental impact assessment prior to project construction and

Processes:
implementation of health. safety and environmental policies during the operations and maintenance stage. EC2 EC3 REMEDIAL MEASURES To TRANSITION - NOT APPLICABLE MINIMUM SOCIAL SAFEGUARDS . Does the entity comply with the SFTG minimum social safeguards? Traffic-light Classification: The economic activity is classified as GREEN. Yes, meet the SFTG's Mss. NOTE: For example, and as an illustration, the issuance of Bonds under the Philippine SEC's CSS and SLB framework, the Bonds issuance, e. g. , Green Bond, needs to comply with the SEC's regulatory requirements as provided in the respective SEC's GSS and SLB guidelines. While the SEC framework provides lists of eligible green and social project categories, nonetheless, the Bond issuer may voluntarily apply the principles under the respective components of the SFTG to assess if such issuance is aligned with the Taxonomy framework. In addition, the considerations for the environmental objectives could provide additional guidance in determining eligible green projects (e. g. , in determining substantial contribution). In this example, although the hydropower plant project is classified as AMBER, the project could still be financed through the issuance of the Green Bond because it promotes the use of renewable energy and is aligned with the categories of the eligible green projects in the SEC's GSS framework. In addition, the company has adopted best practices to mitigate the harm caused to the environment. The floating solar power plant and biogas power plant projects identified for the Green Bond issuance support the environmental objective of climate change mitigation (EO Ij. In addition, the solar power plant and biogas power plant projects do not cause significant harm to the other environmental objectives based on the Guiding Questions. Hence, the Green Bond issuance could be considered to be aligned with the SFTG.

Appendix 4: Use Cases on Climate Change Adaptation
,. Cllm. to Chang.
Adapl. Nori
2. Pre", 11N"Mori
ham
3. '03/4nlUg. "on
harm cou=. p. sign"nanil, ", n 10 other EOS 4 Minlm*, in Social s. fogu. rd, rin. bl. , other stokeholde, * ardor ACUvlU" to Inc. "s. re. Inane. 10 GIImah changu aA. Ant^ co long"r comms signlnc. ni mom to OR. .r FOB un Rho 11n. 0 o1 assassin. in Real Estate and Construction 37 hubn cow's cum. ,read at o1 moat Background The Company is a land developer with operations across ASEAN. The Company has recently acquired a plot of land in the Philippines, which contains a dilapidated office building and several informal settlements. The Company is seeking financing to develop the land area by demolishing the dilapidated office building and constructing a multi￾towered office complex. The Company procures the construction materials (concrete, steel, wood, etc. ) from an accredited supplier and enlists specialised services 000fing, plumbing, electricians, etc. ) from a subcontractor for the activity. Both supplier and subcontractor are based in the Philippines. 38 Corner. ,. plan .XIs, , to Impi","rig remedial, bagur. a to adde, , r'sldu. I harm win, In 5 I ,o y"in vennod 4B. Camp. ny rimets muonal sbnd, r's renting to human rights, ,Dread labour. child labour and Impaei", living '10s. to VBs"n. r" The company's sustainability practices and actions are:
. Increasing the resilience of developments to the effects of climate change . Protecting and restoring local biodiversity through native tree conservation, moving/re-planting, and planting in the design . Increasing resource efficiency, by reducing resource use, UPCycling, and recycling . Ensuring the health and safety of employees in and out of work Adapted from ASEAN Taxonomy Version 2

Setting the Environmental Objective
Threshold question for the Entity/Issuer:
. Has the government issued any guidance Unduding policies, roadmaps, and guidelines) which indicates that this Activity contributes to a specific EO under their NDC, sectoral policies or national plan? o For investors, what is their priority and investment strategy? Which EO(s) is most aligned with its priority and strategy? Answer:
Given the vulnerability of the Philippines to the effects of climate change, including droughts, heatwaves and flooding, the Department of Environment and Natural Resources has led the Inter-Agency Committee on Climate Change to put together the National Strategy for Climate Change Adaptation. A focus of this action plan is infrastructure, including investments in public and private buildings of all types. This will in part involve designing and constructing infrastructure according to the country's guidelines on climate resilient buildings. Therefore, climate change adaptation {E02) is most aligned to the priorities of the government of the Philippines. For investors, they are focused on realigning their exposure into sustainable and responsible investments. Understanding the Philippines' vulnerability to climate change-related extreme weather conditions, they are seeking investments that improve Manila's resilience to climate change, including the construction of infrastructure with climate resilient features like drainage systems and passive cooling. Therefore, E02 is most aligned with their priorities and strategies. Climate Change Adaptation is therefore the investors' primary Environmental Objective. Step
0.1 Is the Activity an Excluded Activity?
No, the activity is riot in the excluded activity list.
Is the Activity in compliance with Philippine laws?
The Activity complies with Philippine laws.
Does the Activity contribute to Climate Change Adaptation? o Does the Activity implement measures to increase the Company's resilience to dimate change? . How does the activity contribute to Company's resilience againstadverse physical impacts of current and future climate change? Proeesse The office complex will use passive cooling methods, like green roofing and landscaping with native trees. This helps reduce temperatures within and around the buildings, as well as manage the Urban Heat Island Effect, hence increase resilience to

Step P oress extreme heat. The construction of the office complex will also involve building extensive drainage systems and a decent percentage of permeable surfaces. Given that Manila is prone to flooding, this infrastructure will enable an increase of the Company's portfolio's resilience to floods. Does the Activity avoid leading to an increase in the vulnerability of human or natural systems because of climate change and climate vanability- related risks? The building is constructed with climate change resilience in mind, it generally does notlead to an increase in vulnerability to the effects of climate change. Does the activity enable other stakeholders and/or activities to increase resilience to climate change? Yes, the activity implements measures that increase the Company's resilience to climate change. ECl ZA Do NO SIGNIFICANT HARM Activity does riot cause potential significant harm to other EOS. o Has an EIA been conducted and approved on the Activity? Yes . What are the results of the EIA and where do the impact onhe activity lie? TechnicalIy, the assessment at this phase of the SFTG is only mandated for significant harm to CCM. The buildings will riot be dedicated to the extraction, storage, transport of manufacture of fossil fuels. Buildings will be constructed in accordance with the Depai'tment of Energy's energy efficiency guidelines, including the use of LED lighting throughout the buildings, double glazed windows, and a green roof. It therefore is riot considered to cause significant harm to EOl. The results of the EIA highlight biodiversity protection through conservation of on-site native trees as part of the building design, moving/replantingifincorporation to the current design is not possible, and planting native trees, However, the demolition and construction of the new office building could potentially generate vast amounts of construction waste, The activity causes potential significant harm, and the entity has optional Iy decided to take this into consideration in assessing taxonomy alignment. EC2 2B REMEDIAL MEASURES To TRANSITION Have remedial measures already started to be implemented at the time of assessment?

esses
Yes. To minimize the amount of waste bound for landfills and promote the establishment of a circular economy, the Company has measures in place e. g. , purchasing mostly recycled materials, and recycling any construction waste they generate. When procuring construction materials, the Company purchases most of their inputs from companies that UPCycle construction waste to produce new construction materials. Any construction waste generated is also separated and sent to in-house or third-party recycling companies. Construction of the new building will adhere to the circular economy standards which are laid out in the Company sustainability policy 3A Does the Activity no longer cause significant harm to other EOS at the time of assessment? Yes. Harm has been mitigated, as recycled materials will be primarily used, and construction waste will be recycled. MINIMUM SOCIAL SAFEGUARDS . Does the Company meet minimum national standards relating to human rights, forced labour, child labour and impact on people living close to investments? The activity is carried out by the Company based in the Philippines. A supplier and a subcontractor are also involved by providing materials and services, respectively, withoutwhich the activity cannot be carried out. Therefore, the social aspect assessment will cover the Company, supplier, and subcontractor. The organizations are based in the same location; hence they will be assessed according to Philippine legislations and regulations. The Company's, supplier's and subcontractor's operations meet the relevant Philippine legislations and regulations on:

Respecting human rights (Constitution of the PhilippinesI
Prevention offorced and childlabourILabourCode of the Philippines, Expanded
Anti-Trafficking in Persons Act of 2012, and Special Protection of Children Against Abuse, Exploitation and Discrimination Act) The Company, supplier and subcontractor up hold the rights and principles indicated in the AHRD and ACPPRMW such as but not limited to the following:
Employment of policies and guidelines that respect freedom of association and
right to collective bargaining in line with Paragraph 27(2) of the AHRD on "right to form trade unions and join the trade union of his or her choice for the protection of his or her interests".
Issuance of written employment contracts that clearly stipulate the basic terms
of employment inline with Paragraph 14 of the ACPPRMW on "right to be issued an employment contract or proper documentation by relevant authorities/ bodies and/or employers with clear and basic terms of employment'.

S ep Freeesses
The supplier and subcontractor have also been found to follow the Company's Supplier's Code of Ethics. However, the Company's operations do not meet the relevant Philippine legislations and regulations on:

Impact on people living close to investments IDepartment of Natural Resources
and Environment Administrative Order No. 30 Series of 2003) The Company at present does not have any avenues for affected groups to raise grievances, despite the potential for social harm in land development (e. g. , displacement of nearby communities) which is a violation of Paragraph 12 of the ADSSP on advocating "strategies that promote the coverage, availability, comprehensive ness, quality, equitability, affordability, and sustainability of various social protection services. Traffic-light Classification: The economic activity is classified as RED.

Appendix 5: Examples or Industry Standards with Certifications and
Verification
Examples taken from various sources, including the IFC Sustainable MsME Finance Reference Guide Sector Group Cross-sector Management Systems and Reporting Sub-sector Standard or Certification title ISO 14001:2015 Environmental Management Systems Relevant objectives ISO 45001:2018 Occupational health and safety management systems Multiple Macro Sector Agriculture, Forestry Land Use (AFOLUj Independent verification? Multiple GHG Protocol Yes - formal audit and certification process by independent auditors. Agricu ture and Palm Oil Multiple Yes - formal audit and certification process by independent auditors. Roundtable Sustainable Palm Oil (RSPO) No - adopted international accounting tool to understand, quantity and manage greenhouse gas emisslons on Agriculture - International Food products, Sustainability & animal feed Carbon and biofuels . Protect Yes formal biodiversity membership and . Resource certification process by independent resilience . No negative certification bodies impact on approved by the communities RSPO. social but widely economic being . and well￾Climate change mitigation Protect biodiversity . Yes - formal registration and certification process by independent

Sector Group Sub-sector Standard or
Certification title
Certifi
DSCC)
Relevant objecLives
Agriculture
Cotton a Resource resilience
No negative impact on communities social and economic well￾being . Better Cotton , Protect Yes formal membership and Initiative (BCl) biodiversity . Resource certification process resilience by independent a No negative third-party verifiers impact on approved by the BCl. coinniunities social Independent verification? certification bodies approved by IsCC. Agriculture Rubber Forest Stewardship Council IFSC) Certified Natural Rubber economic being Agriculture Sugar a Protect Yes - formal biodiversity registration and . Resource certification process resilience by independent . No negative certification bodies impact on approved by communities Assurance Services social and International IASl) i well- for FSC, and well￾Bonsucro Certification (Production and Chain of Custody) economic being . Protect biodiversity . Resource resilience . No negative impact on communities social Agriculture Coffee, Cocoa, Tea, Hazelnut UTZ Certified Yes - formal registration and certification process by independent certification bodies approved by Bonsucro. being . Comply with law economic and well- . Protect biodiversity , Resource resilience Yes - formal and registration certification process by independent certification bodies 70

Sector Group Sub-sector Standard or
Certification title
Agriculture
Food farmed products Incl.
Coffee, Cocoa,
Tea
Relevant objectives

• Rainforest
  and Alliance
  . No impact communities social economic being negative on approved by UTZ lapplicable to both UTZ and Rainforest and Alliance well- certificationI. Independent verification? . Climate change Yes - formal adaptation registration and , Protect certification process biodiversity by independent . Resource certification bodies resilience approved by UTZ . No negative (applicable to both impact on UTZ and Rainforest communities' Alliance social and certification). Agriculture Food farmed products Incl. Sustainable Rice Coffee, Cocoa Platform (SRPj
• Fairtrade
  and Certified economic being a Protect Yes formal biodiversity registration and . Resource certification process resilience by independent . No negative certification body impact on FLOCERT for communities' Fairrrade. social Agriculture Soy well￾Roundtable for . Protect Responsible Soy biodiversity (RTRSj . Resource resilience U No negative impact on communities' social economlc being economic being and well- SRP focuses on environmental and labor aspects of rice cultivation and production. Forestry Forest Stewardship Yes formal registration and certification process by independent accreditation and certification bodies, approved by RTRS . Protect biodiversity and well￾registration formal and 71.

Secror Group Sub-seeror Standard or
Certification title
Council (FSC)
Forest
Management
Certification and Chain of
Custody
Certification
Relevant objectives
Forestry a Resource certification process by independent resilience . No negative certification bodies impact on approved by communities Assurance Services social and International (Aslj well- for FSC. Progranime for . the Endorsement of , Forest Certification (PEFC) Independent verification? being , Comply with law economic Protect Yes - formal biodiversity registration and Resource certification process by independent resilience No negative certification bodies impact on approved by PEFC. communities social and Available economic well- countries being PEFC-endorsed national certification systems. Fisheries . Capture Marine Stewardship Council (MsC) Certification Fisheries . Protect Yes - formal biodiversity registration and . Resource certification process resilience by independent . Comply with law Conformity Yes Assessment Bodies (CABS) an proned by MsC Capture Fairrrade Fisheries Standard In with , Protect Yes formal biodiversity registration and Resource certification process by independent resilience . No negative certification body on FLOCERT for impact communities Fairtrade. social and economic well￾Fisheries Aquaculture Aquaculture Stewardship being a Comply with law a Protect biodiversity registration formal and 72

Sector Group Sub-sector Standard or
Certification title
Coundl (AsC) , Resource certification process Certification resilience by independent a No negative certification bodies impact on approved by communities Assurance Services social and International IASl) t well- for AsC. Construction and Building Real Estate Construction Buildings and real estate Relevant objectives Building Research Establishment Environmental Assessment Method (BREEAM) Independent verification? economic being Buildings Construction and real estate Climate change Yes formal mitigation Climate registration and change adaptation certification process Protect biodiversity by independent Resource resilience certification bodies No negative impact approved by on communities' BREEAM. social and economic well-being Leadership in Climate change Yes - formal Bnei'gy and mitigation Climate registration and Environmental change adaptation certification process Design (LEEDj Protect biodiversity by independent Resource resilience certification bodies No negative impact administered by the On communities' Green Business social and economic Certification Inc. for well-being LEED Buildings Construction and real estate Transportation Transport and Fuel General Transport Excellence Design Greater Erriciencies IEDGEi in Climate change Yes - formal for mitigation Resource registration and resilience certification process by Green Business Certification Incorporated (GBClj. EDGE established by the International Finance Corporation UPC) General Science Climate change Based Targets mitigation Climate minati, e (SBTl) change adaptio" Transport No voluntary initiative adopted by companies to reduce GHG emissions in line with Paris-

Sector Group
Energy, including Electricity upstream production General Sub-sector Standard or Certification title Sector Guidance & Tools Science Targets Initiative (SBTl) Power Sector Guidance & Tool Relevant objectives Electricity production Based Climate mitigation Climate adaption Hydropower International Hydropower Association (IHA) Hydropower Sustainability Assessment Protocol (HSAP) aligned, science￾based targets. change No voluntary initiative adopted by change companies to reduce GHG emissions in line with Paris￾aligned, science￾based targets. Independent verification? Electricity production Climate change Accredited assessor adaptation Protect qualification biodiversity No managed by the IHA negative impact on for auditors communities' social conducting project and economic well- assessment. being Nuclear power No negative impact The IAEA Safety International on communities' Standards support Atomic Energy social and economic the implementation Agency (IAEA) well-being of binding Safety Comply with law international Standards and instruments Nuclear Security national Series infrastructure, typically ratified via national nuclear safety law and regulation. Industrial Manufacturing Apparel and Fairtrade home goods Certified Resource Textile EXchange Standard Resource resilience Yes - formal No negative impact registration and on communities' certification process social and economic by independent well-being certification body Comply with law FLOCERT for Fairtrade. BluesIgn Certification and safety Textile EXchange Standard offers various responsible textile standards that often specific to the textile. are

Sector Group Sub-sector Standard or
Certification title
Manufacturing

• Chemicals
  Relevant objectives
  Responsible
  Care
  Enabling
  Sectors
  Information and
  Communications
  Technology
  Independent verification?
  Protect biodiversity Responsible Care is
  No negative impact a voluntary on communities initiative under social and economic which campanles, well-being through their National Associations work together to continually improve their performance - refer to national schemes recognized under the Responsible Care program. Bluesign offers apparel and textile certifier focusing on reducing the use of chemicals, Waste Circular Economy Carbon Capture and Sequestration and Multiple Climate mitigation Resource resilience Climate mitigation change change

Appendix 6: Non-exhaustive list of potentially eligible projects or activities
for MsMEs38
Examples of potentially eligible projects of activities are listed below. They are taken from the IFC Sustainable MsME Reference Guide, which focused on five specific sectors

• agribusiness, textile, tourism, other services, and other manufacturing. These are
  examples only and do not constitute an automatic endorsement of alignment under the SFTG. Sector Agribusiness Project/Activity Aquaculture with a certification that confirms that the investment does riot undermine the function and resilience of ecosystems, such as mangroves, salt marshes, seagrasses, and critical habitats Production or trade of sugar certified under Bonsucro Production or trade of agricultural products certified under Rainforest Alliance Efficient cold chain with low Global Warming Potential (GWP) refrigerant (e. g. , ammoniaj Mitigation Adaptation Suggested Metric Biomethane collection and use Certification Document Reduction by more than 20% in water consumption per ton of product over the life of the project Certification Document Renewable energy applications (solar, wind, sustainable biomass) in power generation, Source: IFC Sustainable MsME Finance Reference Guide (Chapter 1/1. Eligible sustainable MsME Use or Proceeds) Certification Document Avoided food losses based on annual capacity use equipment (ton/yj Biomethane collected and used (ton/y or MMBTU/yj Annual water savings tin3/y and % of the total water consumption) Annual Renewable Energy Consumed or or of 76

Sector pumping, drying, heat and/or steam generation Project/Activity Electric vehicles Mitigation Adaptation Efficient irrigation - promote efficient water allocation, water recycling, sustainable reuse of graywater, rainwater harvesting, and utilization of native species that have low water consumption, conditional to avoid depletion of natural water resources Climate adaptation and resilience measures that also conserve and/or restore ecosystems (for example, drought-resistant seeds, nutrient cycling, water storage, ecotone levees, floodplain restoration, water storage with watershed restoration or conservation - all projects that make agribusiness more resilient to threats like flooding and drought) Suggested Metric Generated (MWh/y); GHG emissions savings (tC02eq/y) Avoided fuel consumption tin 3Iy) or avoided GHG emissions (tC02eq/xi Annual water savings (in 31y and % of the total water consumption) Reduction in synthetic fertilizer use by at least 20% over the life of the project to reduce downstream eutrophication, and to promote use of biofertilizer and other organic solutions (for example, composting) Switching from monocropping to diversified cropping systems, including intercropping and use Increase agricultural land using more drought resistant crops (hectares); Reduction in land-loss from inundation and/or coastal erosion Ikm2) Annual fertilizer savings {ton/y and % of the total fertilizer used) Area covered by sustainable land and In

Sector of cover crops to improve resilience and soil quality Project/Activity Significant reduction of till age or of no-till implementation practices Cultivation of native or naturalized species that can more readily adapt to variations in production cycles, water quality/quantity, and temperatures Use of sustainable agricultural practices/varieties/technology and/or infrastructure that increases crop yields/quality on existing land without increasing the environmental footprint Mitigation Adaptation Suggested Metric water resources management practices Iha and % of the total area) Hectares under nO till age (ha/y) Area covered (acres); Number of native naturalized species Additional production (ton/y) without Increasing GHG Textiles Adoption of practices and/ or for technologies deforestation or other positive effects on biodiversity ^11.^ Manufacture or trade of sustainable hemp, wool, organic cotton, soy silk, bamboo fabrics, jute, corn fiber Recirculation and water reduction in water consumption per unit of product (e. g. , in3 of saved water per in2 of fabric) by more than 20% over the life of the project zero Tourism or I^'I Electric vehicles (bikes, boats, passenger vehicles) !I emissions Avoided deforestation Ih, /y' Units production (e. g. , ton/yj I; of Annual water savings (in 31y and % of total water consumed) Avoided fuel consumption (in 3Iyj or avoided GHG 78

Sector
Sustainable or ecotounsm ventures that meet established standards for best practices, conserve or restore habitats or avoid iincreasing encroachment on habitat, and work to reduce carbon emissions Other Services Project/Aruvity Mitigation Adaptation Electric vehicles (bikes, boats, passenger vehicles) Renewable energy applications for power, heat, drying, etc. Suggested Metric emissions (tC02eq/y) Certification document Other manufacturing Variable speed drive efficient motor Avoided fuel consumption tin3/y); Avoided GHG Waste-to-energy projects emissions (tC02eq/y) Annual renewable e n e rgy consumed (MWh/y); GHG Waste collection, recycling and management projects that recover or reuse materials and waste tonly if net emission reductions can be demonstrated) Energyefficiencyimprovementin lighting, appliances, and emissions savings ItCO2eq/xi Energy savings (MWh/y) Avoided fuel consumption tin3/y}; Avoided GHG emissions (tC02eq/y) Amount of materials recycled {to nIy' Energy savings 79

Sector equipment, including management systems Project/Activity Substitution of existing heating or cooling systems for buildings by co-generation plants that generate electricity in addition to providing heating or cooling energy￾Mitigation Adaptation Optimize the use of compressed air to address in erriciencies such as leaks in the distribution network and oversized compressors Treatment of wastewater, including wastewater collection networks Suggested Metric {MWh/y); Avoided GHG emissions (tC02eq/y) Energy savings IMWh/yj; Avoided GHG air Waste management projects that capture or combust methane emissions Charging stations and other infrastructure for electric vehicles, hydrogen or dedicated sustainable biofuel fueling emissions acozeq/y) Energy savings (MWh/y); Avoided GHG Projects producing components, equipment or infrastructure dedicated to the renewable and energy efficiency sectors, or low￾carbon technologies emissions (tC02eq/y) Avoided discharge of untreated water tin3/y); Wastewater collected treated ( in 3Iy) Avoided GHG Measures in existing supply chains dedicated to improvements in energy efficiency or resource efficiency upstream or downstream, or emisslons (tC02eq/y) Number of charging, hyd rogen, sustainable biofuel stations Energy savings (MWh/y); Avoided GHG or emissions (tC02eq/y) Avoided GHG emissions ItCO2eq/y)

Sector leading to an overall reduction in GHG emissions Equipment or appliances with an energy efficiency label and score A on a scale of A-F Project/Activity Mitigation Adaptation Suggested Metric Energy efficiency label