Issuance and Requirements for Environmental Debt Securities (Green Bond)

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 60 /POJK.04/2017
CONCERNING
THE ISSUANCE AND REQUIREMENTS OF ENVIRONMENTAL DEBT SECURITIES (GREEN BOND) BY THE GRACE OF THE ALMIGHTY GOD THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that to realize sustainable development capable of maintaining economic stability, a national economic system is needed that emphasizes harmony between economic, social, and environmental aspects; b. that the Sustainable Finance Roadmap in Indonesia, which has been issued by the Financial Services Authority, needs to be followed up by issuing regulations that can develop the Capital Market industry and maintain environmental sustainability;
c. that to provide a legal basis and legal certainty for issuers who will conduct a public offering of environmental debt securities, regulations regarding the issuance and requirements of environmental debt securities (green bond) are needed;
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA

d. that based on the considerations as referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation concerning the Issuance and Requirements of Environmental Debt Securities (Green Bond); Recalling:

1. Law Number 8 of 1995 concerning Capital Markets (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE ISSUANCE AND REQUIREMENTS OF ENVIRONMENTAL DEBT SECURITIES (GREEN BOND).

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

1. Securities are securities, namely debt acknowledgment letters, commercial paper, shares, bonds, debt certificates, investment contract units, derivative contracts over Securities, and any derivative of Securities.
2. Environmental Debt Securities (Green Bond) are debt securities whose issuance proceeds are used to finance or refinance part or all of environmentally sustainable business activities.
3. Environmentally Sustainable Business Activities, hereinafter abbreviated as KUBL, are business activities and/or other activities aimed at protecting, improving, and/or enhancing the quality or function of the environment.
4. Environmental Expert means:
   a. an individual or a group of individuals who have the competence or expertise to conduct assessments, verifications, or tests of KUBL; or b. an institution that has the competence or expertise to conduct assessments, verifications, or tests of KUBL.
5. Public Offering is the activity of offering Securities conducted by the Issuer to sell Securities to the public based on procedures regulated in the Capital Markets Law and its implementing regulations.
6. Issuer is the Party conducting the Public Offering.
7. Registration Statement is a document that must be submitted to the Financial Services Authority by the Issuer in the context of a Public Offering or Public Company.
8. Information or Material Facts are important and relevant information or facts regarding events, occurrences, or facts that can influence the price of Securities on the Stock Exchange and/or the decision of investors, potential investors, or other Parties interested in such information or facts.

CHAPTER II
ISSUANCE REQUIREMENTS FOR ENVIRONMENTAL DEBT SECURITIES (GREEN BOND)
Article 2
Issuers conducting Public Offerings of Environmental Debt Securities (Green Bond) must follow the provisions of legislation in the Capital Market sector regulating Registration Statements, Public Offerings of debt securities, and other related regulations, unless otherwise specifically regulated in this Financial Services Authority Regulation.

Article 3
(1) The issuance of Environmental Debt Securities (Green Bond) may only be done for the purpose of financing and/or refinancing KUBL.
(2) KUBL as referred to in paragraph (1) may consist of:
a. new business activities and/or other activities; b. ongoing business activities and/or other activities; or
c. completed business activities and/or other activities.

Article 4
KUBL that can be financed from the issuance of Environmental Debt Securities (Green Bond) may consist of business activities and/or other activities related to:
a. renewable energy; b. energy efficiency;
c. pollution prevention and control;
d. sustainable management of biological natural resources and land use; e. conservation of terrestrial and aquatic biodiversity; f. environmentally friendly transportation; g. sustainable water and wastewater management; h. climate change adaptation;
i. products that can reduce resource usage and generate less pollution (eco-efficient);
j. environmentally friendly buildings that meet nationally, regionally, or internationally recognized standards or certifications; and k. other environmentally sustainable business activities and/or other activities.

Article 5
(1) Issuers conducting the issuance of Environmental Debt Securities (Green Bond) as referred to in Article 2 must obtain an opinion or assessment from an Environmental Expert that the business activities and/or other activities underlying the issuance of Environmental Debt Securities (Green Bond) are beneficial to the environment. (2) The Environmental Expert as referred to in paragraph (1) must have competence relevant to the business activities and/or other activities as referred to in Article 4. (3) Environmentally beneficial business activities and/or other activities as referred to in paragraph (1) consist of activities aimed at protecting, improving, and/or enhancing the quality or function of the environment.

CHAPTER III
REGISTRATION STATEMENT DOCUMENTS
Article 6
Registration Statement documents in the context of Public Offerings of Environmental Debt Securities (Green Bond), in addition to meeting the provisions in Financial Services Authority Regulations regarding Registration Statement documents in the context of Public Offerings of equity securities, debt securities, and/or sukuk, must be accompanied by additional documents as follows:
a. a letter of commitment from the Issuer to use the proceeds from the Public Offering of Environmental Debt Securities (Green Bond) for KUBL according to the format contained in the Appendix, which is an integral part of this Financial Services Authority Regulation; b. an opinion or assessment result from an Environmental Expert that the business activities and/or other activities underlying the issuance of Environmental Debt Securities (Green Bond) are beneficial to the environment; and
c. proof of the Environmental Expert's competence in providing opinions or assessments as referred to in letter b.

CHAPTER IV
PROSPECTUS
Article 7
Prospectuses in the context of Public Offerings of Environmental Debt Securities (Green Bond), in addition to meeting the provisions in Financial Services Authority Regulations regarding the form and content of prospectuses and summary prospectuses in the context of Public Offerings of debt securities, must disclose in a separate chapter regarding additional information as follows:
a. an explanation of KUBL financed with proceeds from the issuance of Environmental Debt Securities (Green Bond), at least containing:

1. the type of KUBL; and
2. the environmental sustainability objectives of the KUBL that the Issuer aims to achieve;
   b. the process and methods applied to identify and manage environmental risks and social risks that are potentially material related to the business activities and/or other activities as referred to in Article 4; and
   c. a summary of the opinion or assessment result from the Environmental Expert as referred to in Article 6 letter b.

CHAPTER V
USE OF PROCEEDS FROM PUBLIC OFFERING
Article 8
Proceeds from the Public Offering of Environmental Debt Securities (Green Bond) must be used at least 70% (seventy percent) to finance KUBL.

Article 9
(1) Issuers may change the use of proceeds from the Public Offering of Environmental Debt Securities (Green Bond) in accordance with the provisions in Financial Services Authority Regulations regarding reports on the realization of the use of proceeds from Public Offerings. (2) Changes to the use of proceeds from the Public Offering as referred to in paragraph (1) may only be made for KUBL. (3) Changes to the use of proceeds from the Public Offering as referred to in paragraph (1) must be accompanied by an opinion or assessment result from an Environmental Expert as referred to in Article 6 letter b.

CHAPTER VI
REPORTING
Article 10
(1) Issuers conducting the issuance of Environmental Debt Securities (Green Bond) as referred to in Article 2 must submit periodic review results conducted by Environmental Experts once (one) per year (one) year and whenever there is a material change in KUBL. (2) Review results as referred to in paragraph (1) must be attached to the Issuer's annual report submitted to the Financial Services Authority. (3) Submission of review results as referred to in paragraph (1) must be conducted until all of the Issuer's obligations to holders of Environmental Debt Securities (Green Bond) are completed.

Article 11
(1) Issuers must manage the proceeds from the Public Offering of Environmental Debt Securities (Green Bond) and submit reports on the use of proceeds from the Public Offering as regulated in Financial Services Authority Regulations regarding reports on the realization of the use of proceeds from Public Offerings. (2) Management of proceeds from the Public Offering as referred to in paragraph (1) must be conducted by creating a special account or by creating separate notes in the notes to the financial statements.

CHAPTER VII
CHANGE OF STATUS OF ENVIRONMENTAL DEBT SECURITIES (GREEN BOND)
Article 12
(1) In the event that review results as referred to in Article 10 paragraph (1) state that business activities and/or other activities no longer meet the requirements as KUBL, the Issuer must formulate a plan and take efforts so that the business activities and/or other activities continue to meet the requirements as KUBL. (2) Plans and efforts as referred to in paragraph (1) along with review results stating that business activities and/or other activities no longer meet the requirements as KUBL must be submitted to the Financial Services Authority no later than 14 (fourteen) working days after the date of such review results. (3) Efforts as referred to in paragraph (1) must be conducted for a maximum of 1 (one) year since the receipt of the plan and efforts by the Financial Services Authority.

Article 13
(1) Environmental Debt Securities (Green Bond) no longer become Environmental Debt Securities (Green Bond) if the efforts made by the Issuer as referred to in Article 12 fail to make the business activities and/or other activities financed from the proceeds of the issuance of Environmental Debt Securities (Green Bond) meet the requirements as KUBL again. (2) In the event of conditions as referred to in paragraph (1), the Issuer must submit Information or Material Facts reports to the Financial Services Authority and make announcements to the public as regulated in Financial Services Authority Regulations regarding transparency of Information or Material Facts by Issuers or public companies.

Article 14
(1) In the event of conditions as referred to in Article 13 paragraph (1), holders of Environmental Debt Securities (Green Bond) may request the Issuer:
a. to repurchase Environmental Debt Securities (Green Bond); and/or b. to provide compensation in the form of increased coupons on Environmental Debt Securities (Green Bond).
(2) Regulations regarding the procedures for repurchase and provision of compensation, including the magnitude of the coupon increase rate as referred to in paragraph (1), must be contained in the trust deed. (3) Requests for repurchase and/or provision of compensation as referred to in paragraph (1) must be conducted through the trustee. (4) In the event that holders of Environmental Debt Securities (Green Bond) request the Issuer to repurchase and/or provide compensation in the form of increased coupons on Environmental Debt Securities (Green Bond) as referred to in paragraph (1), the Issuer must repurchase Environmental Debt Securities (Green Bond) and/or provide compensation in the form of increased coupons on Environmental Debt Securities (Green Bond). (5) Repurchase of Environmental Debt Securities (Green Bond) by the Issuer as referred to in paragraph (2) is conducted with the following provisions:
a. Environmental Debt Securities (Green Bond) that have been repurchased by the Issuer as referred to in paragraph (4) cannot be sold again by the Issuer; b. the mechanism for determining the repurchase price is contained in the trust deed; and
c. the execution of repurchase must be completed no later than 3 (three) months after the trustee submits the repurchase request.

Article 15
In fulfilling obligations as referred to in Article 14 paragraph (5), the trust deed may regulate parties acting as guarantors.

Article 16
Issuers are exempted from the obligation to repurchase Environmental Debt Securities (Green Bond) and/or provide compensation in the form of increased coupons on Environmental Debt Securities (Green Bond) as referred to in Article 14 paragraph (4), in the event that conditions as referred to in Article 13 paragraph (1) are caused by circumstances beyond the Issuer's ability and power, including:
a. natural disasters, war, riots, fires, strikes that significantly affect the continuity of the Issuer's business; and/or b. other events that significantly affect the continuity of the Issuer's business as determined by the Financial Services Authority.

Article 17
(1) The Financial Services Authority may provide incentives for Issuers issuing Environmental Debt Securities (Green Bond).
(2) The provision of incentives as referred to in paragraph (1) is established by a Financial Services Authority Decree.

Article 18
The provision of incentives as referred to in Article 17 does not apply in the event that business activities and/or other activities underlying the issuance of Environmental Debt Securities (Green Bond) no longer meet the requirements as KUBL.

CHAPTER VIII
SANCTION PROVISIONS
Article 19
(1) Without prejudice to criminal provisions in the capital market sector, the Financial Services Authority has the authority to impose administrative sanctions on any Party violating the provisions of this Financial Services Authority Regulation, including parties causing the violation, in the form of:
a. written warnings; b. fines, namely the obligation to pay a certain amount of money;
c. business activity restrictions;
d. business activity suspension; e. business license revocation; f. approval cancellation; and/or g. registration cancellation.
(2) Administrative sanctions as referred to in paragraph (1) letters b, c, d, e, f, or g may be imposed with or without prior imposition of administrative sanctions in the form of written warnings as referred to in paragraph (1) letter a. (3) Administrative sanctions in the form of fines as referred to in paragraph (1) letter b may be imposed independently or together with the imposition of administrative sanctions as referred to in paragraph (1) letters c, d, e, f, or g.

Article 20
In addition to administrative sanctions as referred to in Article 19 paragraph (1), the Financial Services Authority may take specific actions against any Party violating the provisions of this Financial Services Authority Regulation.

Article 21
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 19 paragraph (1) and specific actions as referred to in Article 20 to the public.

CHAPTER IX
CLOSING PROVISIONS
Article 22
This Financial Services Authority Regulation takes effect on the date of enactment.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Yuliana

To ensure everyone knows it, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on 21 December 2017

CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, signed
WIMBOH SANTOSO

Enacted in Jakarta on 22 December 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 281

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 60 /POJK.04/2017
CONCERNING
THE ISSUANCE AND REQUIREMENTS OF ENVIRONMENTAL DEBT SECURITIES (GREEN BOND)

I. GENERAL
Capital markets as one of the sources of national development financing play a very important role in increasing equity, growth, and national economic stability towards improving people's welfare. However, national development using resources excessively can increase social gaps and cause environmental damage. The Indonesian Government through long-term development strategies contained in the Long-Term Development Plan (RPJP) for 2005-2025 states that the national development vision for 2005-2025 is to achieve an independent, advanced, fair, and prosperous Indonesia. The realization of this national development vision is achieved through 8 (eight) development missions. One of these missions is to realize a green and sustainable Indonesia by:

1. managing development implementation by maintaining balance between utilization, sustainability, existence, and utility of natural resources and the environment;
2. utilizing economic natural resources and the environment sustainably; and
3. maintaining and utilizing biodiversity as the basic capital for development.
   The application of Sustainable Finance principles as the realization of the green and sustainable Indonesia mission is a concrete form of Indonesia's commitment to the international community by providing funding sources to conduct mitigation and adaptation to climate change. Capital markets as one of the financial institution systems in Indonesia are expected to be able to apply sustainable finance principles, which are the implementation of Law Number 32 of 2009 concerning Environmental Protection and Management, to develop and apply environmental economic instruments, including environmentally friendly policies. In order to support Indonesia's commitments in the international community mentioned above, the Financial Services Authority has issued the Sustainable Finance Roadmap as the implementation of sustainable development in the financial sector, specifically concerning the development of environmentally sustainable economies. In this Sustainable Finance Roadmap, one of the things that must be realized is the development of debt securities whose issuance purpose is to maintain or enhance environmental sustainability. That in order to provide a legal basis for the development of debt securities as mentioned above, the Financial Services Authority needs to issue a Financial Services Authority Regulation concerning the Issuance and Requirements of Environmental Debt Securities (Green Bond). Considering that Environmental Debt Securities (Green Bond) are a new product in the Indonesian capital market, the formulation of this Financial Services Authority Regulation refers to the issuance standards for environmental debt securities (Green Bond) issued by the International Capital Market Association (“ICMA”).

The main points of regulation regulated in this Financial Services Authority Regulation include:

1. the issuance of Environmental Debt Securities (Green Bond) may only be done to finance or refinance KUBL;
2. business activities and/or other activities that can be financed from the issuance of Environmental Debt Securities (Green Bond);
3. the Issuer's obligation to obtain opinions or assessments from Environmental Experts according to their competence regarding business activities and/or other activities financed by the issuance of Environmental Debt Securities (Green Bond);
4. the use of proceeds from Public Offerings of Environmental Debt Securities (Green Bond); and
5. obligations that must be performed by the Issuer in the event that Environmental Debt Securities (Green Bond) no longer become Environmental Debt Securities (Green Bond).

II. ARTICLE BY ARTICLE
Article 1
Clear enough.
Article 2
Clear enough.
Article 3
Clear enough.
Article 4
Letter a
What is meant by “renewable energy” is energy sources generated from sustainable energy resources if managed well, including geothermal, wind, bioenergy, sunlight, water flow and drops, and movement and temperature differences in ocean layers. Examples of business activities and/or other activities utilizing renewable energy include the construction of mini hydroelectric plants and the use of solar power for electricity generation. Letter b What is meant by “energy efficiency” is steps, methods, or principles expected to use energy efficiently. Examples of business activities and/or other activities utilizing energy efficiency include:

1. construction of new and renovated environmentally friendly buildings, namely by reducing electricity usage for lighting and air circulation, which allows reducing the use of Air Conditioners (AC);
2. energy storage;
3. district heating; or
4. smart grids.
   Letter c
   What is meant by “pollution prevention and control” includes wastewater treatment, air emission reduction, greenhouse gas control, soil remediation, waste prevention, waste reduction, recycling waste for energy, adding value to products, and waste reconversion, and environmental monitoring analysis. Letter d What is meant by “sustainable management of biological natural resources and land use” includes sustainable agriculture, sustainable livestock, fisheries, aquatic cultivation, forestry, and climate-resilient agriculture as well as conservation of biological food crops or irrigation. Letter e What is meant by “conservation of terrestrial and aquatic biodiversity” includes protection of coastal, marine, and river basin environments.

Letter f
What is meant by "environmentally friendly transportation" includes, among others, electric transportation, hybrid transportation, public transportation, electric trains, non-motorized vehicles, multi-modal transportation, infrastructure for vehicles with environmentally friendly energy, and the reduction of harmful emissions.

Letter g
What is meant by "sustainable water and wastewater management" includes environmentally friendly infrastructure and/or drinking water, urban drainage systems, and various forms of flood mitigation.

Letter h
What is meant by "climate change adaptation" includes support for information systems such as climate observation and early warning systems.

Letter i
What is meant by "products that can reduce resource use and produce less pollution (eco-efficient)" includes, among others, the development and introduction of environmentally friendly products with eco-labels or environmental certifications, as well as resource-efficient packaging and distribution.

Letter j
Clearly sufficient.

Letter k
Clearly sufficient.

Article 5
Paragraph (1)
What is meant by "opinion or assessment" includes, among others:

1. assessment opinion;
2. verification;
3. certification report; or
4. test results.

Paragraph (2)
What is meant by "competence" is the competence required to conduct an assessment of the Selected Environmental Business Activities (KUBL) chosen to be carried out by the Issuer.

Paragraph (3)
Clearly sufficient.

Article 6
Letter a
Clearly sufficient.

Letter b
What is meant by "opinion or assessment results" includes, among others:

1. assessment opinion;
2. verification;
3. certification report; or
4. test results.

Letter c
What is meant by "evidence of Environmental Expert competence" includes, among others:

1. having a competence or expertise certificate issued by a nationally or internationally recognized institution in the field of environment; or
2. having experience and expertise in environmental audit that can be proven by work experience or active involvement in an environmentally sustainable activity.

Example:
Having a competence certificate from an institution established based on the Regulation of the Minister of State for the Environment Number 22 of 2009 concerning the Management of Registration of Competence in the Field of Environment or its implementing regulations.

Article 7
Letter a
Number 1
What is meant by "type of KUBL" is one or more business activities or other activities that are environmentally sustainable as referred to in Article 4.

Number 2
Example 1:
In the event that Environmental Debt Securities (Green Bond) are used for financing the development of green buildings, the environmental sustainability target of the KUBL is to support government programs, including the reduction of CO2 emissions, electricity energy savings, and water consumption savings.

Example 2:
In the event that Environmental Debt Securities (Green Bond) are used for financing the management of sustainable peatland ecosystems, the environmental sustainability target of the KUBL includes, among others, the realization of sustainable aquatic culture (aquaculture) development on peatland.

Letter b
Clearly sufficient.

Letter c
Clearly sufficient.

Article 8
Clearly sufficient.

Article 9
Clearly sufficient.

Article 10
Paragraph (1)
What is meant by "periodically 1 (one) time in 1 (one) year" is a review conducted every year since the effectiveness of the Registration Statement for the Sustainable Public Offering and must be conducted no later than on the anniversary of the issuance of the Environmental Debt Securities (Green Bond).

Example:
Environmental Debt Securities (Green Bond) obtained an effective statement from the Financial Services Authority on November 25, 2017. The Issuer has the obligation to conduct a periodic review no later than November 25, 2018.

Example of material changes in KUBL such as the construction of a mini hydroelectric power plant project:
Contract models related to the construction of a mini hydroelectric power plant project originally used a "turnkey" model, but changed to a contract model of "long term service agreement."

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Clearly sufficient.

Article 11
Clearly sufficient.

Article 12
Clearly sufficient.

Article 13
Clearly sufficient.

Article 14
Clearly sufficient.

Article 15
Clearly sufficient.

Article 16
Letter a
Clearly sufficient.

Letter b
What is meant by "other events that have a significant impact" includes, among others, changes in government policy.

Article 17
Paragraph (1)
Examples of incentives that can be provided by the Financial Services Authority include:
a. including the Issuer in human resource competence development programs; b. the awarding of Sustainable Finance Awards; and/or
c. other incentives.

Paragraph (2)
Clearly sufficient.

Article 18
Clearly sufficient.

Article 19
Clearly sufficient.

Article 20
What is meant by "certain actions" includes, among others:
a. postponement of the granting of an effective statement, for example, an effective statement for business mergers, business consolidations; and b. postponement of the granting of a statement by the Financial Services Authority that there are no further responses to documents submitted to the Financial Services Authority in the context of capital increases by granting Preemptive Rights for Public Companies.

Article 21
Clearly sufficient.

Article 22
Clearly sufficient.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6149

This copy is consistent with the original
Legal Director 1
Legal Department signed
Yuliana
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA

APPENDIX
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 60 /POJK.04/2017
CONCERNING
THE ISSUANCE AND REQUIREMENTS OF
ENVIRONMENTAL DEBT SECURITIES
(GREEN BOND)

ISSUER'S DECLARATION

I, the undersigned (Chief Executive Director/Board Member authorized to represent the Issuer according to the Articles of Association)* representing:
Issuer : ............................................................................................
Business Activity : ............................................................................................
Address : ............................................................................................
Telephone and Facsimile : ............................................................................................

In the context of the Public Offering ....................................(specify the Environmental Debt Securities (Green Bond) offered) amounting to ............................ hereby declare that we are committed to using the proceeds from the Public Offering ....................................(specify the Environmental Debt Securities (Green Bond) offered) to finance or refinance Environmental Sustainable Business Activities.

……..…….. (place) , ………. (date/month/year)
*cross out what is not necessary

Established in Jakarta on November 21, 2017

CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY, signed
WIMBOH SANTOSO

(Chief Executive Director/Board Member authorized to represent the Issuer according to the Articles of Association)* Stamp
........................................
(clear name and signature)