SEC MC No. 16, Series of 2025: Adoption of PFRS on Sustainability Disclosures

SEC MEMORANDUM CIRCULAR NO. ___
Series of 2025
TO: PUBLICLY LISTED COMPANIES AND LARGE NON-LISTED ENTITIES SUBJECT: ADOPTION OF PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS) ON SUSTAINABILITY DISCLOSURES AND ISSUANCE OF REPORTING GUIDELINES FOR PUBLICLY LISTED COMPANIES AND LARGE NON-LISTED ENTITIES WHEREAS, to promote sustainability reporting and enhance its relevance to Philippine publicly listed companies (PLCs) and large non-listed entities (LNLs), the Securities and Exchange Commission (SEC), in its Commission En Banc meeting held on 04 December 2025, resolved to adopt the Philippine Financial Reporting Standards (PFRS) S1, General Requirements for Disclosure of Sustainability-related Financial Information and PFRS S2, Climate-related Disclosures. In line with this adoption, the Commission also approved the issuance of the Sustainability Reporting Guidelines for PLCs and LNLs (the “SR Guidelines”), which includes the PFRS Adoption Roadmap (“Roadmap”). WHEREAS, the adoption of International Financial Reporting Standards (IFRS) S1 and S2, issued by the International Sustainability Standards Board (ISSB), was approved by the Philippine Financial and Sustainability Reporting Standards Council (FSRSC). These standards were endorsed to the Professional Regulatory Board of Accountancy (PRBOA) for approval and were subsequently approved on 17 October 2024, through Resolution No. 61, in line with the standard-setting process for local application. WHEREAS, the SR Guidelines and Roadmap for PLCs and LNLs (“covered companies”) serve to encourage sustainable business practices and align company disclosures with international standards to attract environmental, social, and governance (ESG)-focused investors in the Philippine capital market. The Guidelines support companies in evaluating and managing their non-financial performance, including economic, environmental, social and governance factors, while also monitoring contributions to global and national sustainability agendas such as the UN Sustainable Development Goals and AmBisyon Natin 2040. WHEREAS, the framework adopted under these guidelines enables companies and stakeholders to better understand the financial impacts of sustainability-related risks and opportunities, supporting long-term value creation and improved capital allocation decisions. WHEREAS, this memorandum circular is issued pursuant to Section 179(d) of Republic Act No. 11232, or the Revised Corporation Code, granting the Commission authority to promote good corporate governance and investor protection through internationally aligned regulations. It also supports the Commission’s mandate under Section 68 of Republic Act No. 8799, or the Securities Regulation Code, on corporate financial reporting, by enhancing the transparency, comparability and interconnectivity of both financial and sustainability disclosures in the Philippine capital market.

Section 1. Sustainability Reporting Format and Frameworks to be Used.

1. PLCs and LNLs that are reporting entities under Section 17.2 of the Revised Securities
   Regulation Code shall submit a Sustainability Report as an attachment to the annual report.
2. LNLs not falling under paragraph 1 shall submit a Sustainability Report together with their
   audited financial statements.
3. All PLCs and LNLs are required to have their Sustainability Reports reviewed and approved
   by the board of directors prior to issuance.
4. From the effectivity of this Memorandum Circular until the fiscal year (FY) immediately
   preceding the year of their mandatory adoption of PFRS S1 and PFRS S2, PLCs shall continue to comply with the Sustainability Reporting Guidelines prescribed under SEC Memorandum Circular No. 4, Series of 2019. These PLCs are, however, encouraged to commence transitioning to PFRS S1 and PFRS S2 during the intervening FYs prior to mandatory adoption. Beginning FY 2026, covered companies shall start adopting PFRS S1 and PFRS S2 with limited extensions of transition standard reliefs, under a tiered approach: (refer to Table 1) FY beginning on or after 1 January 2026 (reporting in 2027) Tier 1 – PLCs (listed in the Philippine Stock Exchange, Inc. or "PSE") with market capitalization of more than PHP 50 billion as of 31 December 2025, or at the date of its listing after 31 December 2025. FY beginning on or after 1 January 2027 (reporting in 2028) Tier 2 – PLCs (listed in PSE) with market capitalization of more than PHP 3 billion up to PHP 50 billion as of 31 December 2025, or at the date of its listing after 31 December 2025. FY beginning on or after 1 January 2028 (reporting in 2029) Tier 3 – PLCs and LNLs as indicated below:
   (a) PLCs (listed in PSE) with market capitalization of PHP 3 billion or less as of 31 December 2025, or at the date of its listing after 31 December 2025; (b) PLCs whose debt securities are listed solely on the Philippine Dealing & Exchange Corp. (PDEx) and have no equity securities listed in PSE; and (c) LNLs with annual revenue of more than PHP 15 billion for the immediately preceding FY. Revenue is income arising in the course of an entity’s ordinary activities, as defined by the applicable PFRS Accounting Standards. The threshold shall be based on the consolidated or group-level revenues if the company is a parent; otherwise, it shall be at the company-level. Market capitalization shall refer to the market value of a PLC's outstanding equity securities, calculated as the total number of outstanding shares multiplied by their respective closing or last traded prices as of 31 December 2025, regardless of the end of the FY. For companies listed in the PSE after 31 December 2025, the market capitalization shall be based on the price on the date of listing.

For purposes of determining whether a company qualifies as an LNL, the basis shall be the annual revenue for the FY ending on or after 31 December 2027. Companies that do not meet the revenue threshold in that FY shall continue to be evaluated in each succeeding FY thereafter to determine if they subsequently qualify as LNLs. Should the annual revenue be denominated in a foreign currency, such amount shall be converted using the closing rate at the measurement date. The closing rate is the spot exchange rate at which one currency can be exchanged into PHP for immediate delivery, as defined by the applicable PFRS Accounting Standards. The tier classification of a PLC or LNL shall be determined as of the relevant measurement date. Once classified under a tier, the entity shall be required to prepare and submit an annual sustainability report on an ongoing basis. The tiered approach is intended solely to determine the timing of the first adoption of PFRS S1 and S2.
5. Other disclosures that are aligned with other international standards and frameworks may
be included within the same report, as an addition to PFRS S1 and S2, as long as the following conditions are met:
(a) the framework applied does not conflict with PFRS S1 and S2; (b) the disclosure does not obscure material information in the sustainability reports; and (c) the framework applied is disclosed in the report.
Section 2. External Assurance.
Mandatory external limited assurance on Scope 1 and 2 Greenhouse Gas (GHG) emissions by an independent assurance practitioner shall be required two (2) years after the initial implementation of PFRS S1 and S2 for each tier (refer to Table 2). An independent assurance practitioner may be either a Certified Public Accountant or a qualified non-accountant. Over time, the requirement will progress toward reasonable assurance. Companies are also encouraged to voluntarily obtain reasonable assurance over their full sustainability report. To ensure a consistent and high-quality sustainability assurance engagement, such external assurance shall be conducted in accordance with the International Standard on Sustainability Assurance (ISSA) 5000, which is designed to be profession agnostic, provided that they meet the quality management and ethical requirements of ISSA 5000. Additional rules and guidelines on external assurance shall subsequently be issued by the Commission.
Section 3. Transition Reliefs.
To address the challenges identified from public consultations, there are limited extensions to the transition standard reliefs provided in the Standards. There are no additional reliefs other than those described below because companies are allowed to use “reasonable and supportable information that is available to the entity at the reporting date without undue cost or effort” on certain disclosure requirements (refer to Tables 1-3):

1. Permitted to disclose information on only climate-related risks and opportunities: one (1)
   year for Tiers 1 & 2, two (2) years for Tier 3;

2. Permitted to submit its Sustainability Report after publishing its related financial statement
   either (a) together with the next second-quarter or half-year interim financial statements; or (b) within nine (9) months from the end of the reporting period if no interim financial statements are issued: one (1) year for all tiers;

3. Not required to disclose comparative information: one (1) year for all tiers;

4. Use method other than GHG Protocol: A Corporate Accounting and Reporting Standard: one
   (1) year for all tiers; and

5. Scope 3 GHG emissions are not required: two (2) years for all tiers.
   Section 4. Exemptions to Mandatory Reporting.
   To ease reporting compliance, an LNL may opt to be exempted to submit a Sustainability Report when all the following conditions are met:

6. Its immediate, intermediate or ultimate parent, as defined by the applicable PFRS Accounting
   Standards, is already preparing and filing the prescribed Sustainability Report in accordance with the sustainability reporting framework prescribed in the jurisdiction where such parent company submits its corporate reports—for example, the PFRS S1 and S2 in the Philippines, or the applicable sustainability disclosure framework required in its home country (e.g., ESRS as mandated in the European Union, IFRS Sustainability Disclosure Standards as prescribed in other jurisdictions);

7. Its sustainability-related disclosures are included in that parent's report, which is publicly
   available; and

8. It submits a duly accomplished “Certificate of Exemption from Mandatory Sustainability
   Reporting” (Annex A) as an attachment to the annual financial statements. The Commission may consider other cases as valid exceptions from the mandatory submission of Sustainability Reports.
   Section 5. Compliance with the Attachment of Sustainability Report.
   For PLCs, non-attachment of the Sustainability Report to the Annual Report and non￾compliance with PFRS S1 and S2 shall be subject to the penalty for Incomplete Annual Report provided under SEC Memorandum Circular No. 6, Series of 2005 (Consolidated Scale of Fines) and SEC Resolution No. 581, Series of 2021, which provides that the penalties for non￾submission or late submission of Sustainability Reports shall be subject to a separate scaling of penalties. For purposes of applying the scaling of penalties, the count of offenses under this circular shall commence as the first offense, and shall not be considered a continuation of any prior offenses related to SEC Memorandum Circular No. 4, Series of 2019. For LNLs, penalties shall be subject to subsequent issuances of the Commission.
   Section 6. Repealing Clause.
   This Memorandum Circular repeals SEC Memorandum Circular No. 4, Series of 2019, and all other circulars, rules, regulations, or parts thereof that are inconsistent with the provisions of this Circular.

Section 7. Guidance Materials.
The Commission shall issue subsequent guidance materials to assist covered entities in the effective implementation of this Memorandum Circular.
Section 8. Effectivity.
This Memorandum Circular shall take effect fifteen (15) days after publication in two (2) newspapers of general circulation. Issued this 22nd day of December, 2025 in Makati City, Philippines. For the Commission FRANCISCO ED. LIM Chairperson

Table 1
Adoption of IFRS Sustainability Disclosure
Standards with transition reliefs
FY Beginning on or After January 1, 20XX
Tier 1 – PLCs (listed in PSE) with market capitalization of more than PHP 50 billion

• Climate-first approach
• Report after release of FS (Q2 or w/in 9mos)
• Not required to report comparative info
• Methods other than GHG Protocol are allowed
• Scope 3 emissions are not mandatory
  Tier 2 – PLCs (listed in PSE) with market capitalization of more than PHP 3 billion up to PHP 50 billion
• Climate-first approach
• Report after release of FS (Q2 or w/in 9mos)
• Not required to report comparative info
• Methods other than GHG Protocol are allowed
• Scope 3 emissions are not mandatory
  Tier 3 – (a) PLCs (listed in PSE) with market capitalization of PHP 3 billion or less; (b) PLCs solely listed in PDEx; and (c) LNLs with annual revenue of more than PHP 15 billion
• Climate-first approach
• Report after release of FS (Q2 or w/in 9mos)
• Not required to report comparative info
• Methods other than GHG Protocol are allowed
• Scope 3 emissions are not mandatory
  Temporary transition reliefs:
  Table 2
  Mandatory limited assurance by accountant or non-accountant assurance practitioners FY Beginning on or After January 1, 20XX Tier 1 PLCs (listed in PSE) Tier 2 PLCs (listed in PSE) Tier 3 PLCs (listed in PSE), PLCs solely listed in PDEx, and LNLs 2026 2027 2028 2029 2030 First year of adoption Full adoption First year of adoption Full adoption First year of adoption Full adoption 2026 2027 2028 2029 2030 Scopes 1 and 2 only Scopes 1 and 2 only Scopes 1 and 2 only

Table 3
Transition Reliefs Description Tiers
1 and 2
Tier 3
Climate-first approach
Permitted to disclose information on only climate-related risks and opportunities (in accordance with IFRS S2). 1 year 2 years Report after release of FS (Q2 or w/in 9mos) Permitted to report its sustainability reports after it publishes its related financial statements. Sustainability reports should be filed:

• At the same time as half-year interim (Q2) financial statements;
• Within 9 months if not required or does not voluntarily provide
  interim financial statements.
  1 year 1 year
  Not required to report comparative info.
  Not required to disclose comparative information in the sustainability reports 1 year 1 year Methods other than GHG Protocol are allowed Permitted to continue using a method for measuring GHG emissions other than the GHG Protocol: A Corporate Accounting and Reporting Standard (2004). 1 year 1 year Scope 3 emissions are not mandatory Not required to disclose its Scope 3 GHG emissions. 2 years 2 years

Annex A
CERTIFICATE OF EXEMPTION FROM
MANDATORY SUSTAINABILITY REPORTING
This is to certify that [Name of the Company] is exempt from the mandatory sustainability reporting requirement, in compliance with the SEC Memorandum Circular No. __, Series of ___. The exemption is based on the following conditions, which have been duly met:
a. The company’s [immediate/intermediate/ultimate] parent, [Parent Company’s Name], is already preparing the prescribed sustainability￾related disclosures in accordance with PFRS S1 and S2 or [any other Standards acceptable in the home jurisdiction of the Parent Company]; and b. The company’s sustainability-related disclosures are fully included in that parent's report. A copy of the Parent Company’s report filed on [filing date] is publicly accessible at [insert link]. A copy of the conglomerate map or proof or parent-subsidiary relationship is attached herein [insert link]. This certification is executed for the purpose of complying with the abovementioned reporting requirement of the Securities and Exchange Commission and for all other purposes it may serve. Done, this _____ of _____________, at _____________, Philippines. _________________________________ _________________________________ Chief Sustainability Officer Chairman of the Board