The Argentine Securities and Exchange Commission (CNV) issued General Resolution No. 952, submitting to public consultation a draft resolution proposing to update the "Guidelines for the issuance of Social, Green, and Sustainable Securities in Argentina".  This initiative is part of the CNV's efforts to promote the development of transparent, inclusive, and sustainable capital markets.

A simplified and guaranteed regime for negotiable bonds with social impact has been recently enacted (see our article here).  and previously the "Guidelines for the Issuance of Social, Green and Sustainable Bonds" were issued (see our article here).

In addition to the already existing Social, Green, and Sustainable labels, the project includes new labels for sustainability-linked securities, transition bonds, blue bonds, and any other securities that have specific thematic labels accreditable by independent third parties. These instruments will be named indistinctly as "thematic security" or "SVS+ Security".

As a result of this change in the theoretical framework, the Guidelines will be renamed "Guidelines for the Issuance of Thematic Securities in Argentina". The draft also updates the terms used in the CNV Regulations to include the new name of the Thematic Guidelines and the term "SVS+ Security".

 

Definition of SVS+ Security labels

Something different about this Resolution is that the Thematic Guidelines specifically define the new labels, and these definitions are added to those for Green, Social, and Sustainable labels. The new definitions are:
 

1. Sustainability-linked bonds: the financial and/or structural characteristics of these bonds may vary according to whether the issuer achieves certain sustainability or ESG goals within a predefined period. The funds raised through the issuance of these bonds are for general corporate purposes, so the specific use of these bonds is not decisive for their categorization. Nevertheless, issuers may choose to allocate the funds to green and/or social activities or projects.

 

2. Gender bonds: these are social bonds whose funds are used exclusively to finance activities or projects linked to diversity, equity, and gender inclusion matters, and whose target population is women and the LGTBIQ+ community. They can be structured as social, sustainable, or sustainability-linked bonds.

 

3. Blue bonds: these are funds exclusively for financing activities or projects related to preserving, protecting, and restoring aquatic ecosystems. They can be structured as green, sustainable, or sustainability-linked bonds.

 

4. Orange bonds: their proceeds are exclusively for financing creative and/or cultural projects or activities. They can be structured as social, sustainable, or sustainability-linked bonds.

 

5. Transition bonds: the funds obtained through these bonds are exclusively for financing the issuer’s climate transition and emissions reduction strategies. They can be structured as green, sustainable, or sustainability-linked bonds.

 

Procedure for the issuance of SVS+ securities

In the Thematic Guidelines, the CNV expressly recognizes the International Capital Market Association (ICMA) Principles as a guide for the labeling of SVS+ securities, and recommends applying the Green Bond Principles (GBP), Social Bond Principles (SBP), Sustainable Bond Guidelines (SBG), and Sustainability Linked Bond Principles (SBLP) to those securities with funds for financing projects with a more specific environmental and/or social impact. In this way, these bonds’ transparency and the disclosure of information would be guaranteed, promoting integrity in the development of the SVS+ Securities Market.

In line with the ICMA Principles, SVS+ Securities should comply with:
 

1. Use of proceeds: the proceeds of the issued securities should be used for financing or refinancing projects or activities with green and/or social purposes.
2. Project selection and evaluation process: issuers should establish, document, and maintain a decision-making process for determining project eligibility; communicating to investors their environmental and/or social goals, the processes used to determine project eligibility, the eligibility or exclusion criteria, and any other process used to identify and manage associated environmental and/or social risks.
3. Management of funds: the funds obtained should be allocated to specific accounts or go through other reliable mechanisms that ensure traceability and transparency in their use.
4. Reporting: the issuer should provide, through an annual report, updated and accessible information on the use of funds and the impact of the security until all funds have been allocated.

 

SVS+ trading panels

The CNV Rules allow markets to create SVS+ segments and/or trading panels, and to issue the relevant regulations. To do so, the markets must take the Thematic Guidelines into account.

Likewise, the markets may exclude an SVS+ Security from the thematic panel if the issuer:
 

1. Does not meet the use-of -proceeds criteria.
2.  Does not comply with its reporting obligations.
3. Does not comply with the market regulations created for this purpose.
4. Does not comply with the regulations the CNV established.

Finally, the CNV recommends including the loss of the thematic label as grounds for calling a meeting of bondholders to decide if they should maintain the security under the conditions initially agreed but without the thematic label or redeem the security.