New proposal could streamline GSSS bonds issuance, seeking feedback
The Financial Markets Authority (FMA) is proposing a class exemption aimed at simplifying the process for listed companies in New Zealand to issue green, social, sustainable, and sustainability-linked (GSSS) bonds.
The exemption would allow these companies to offer GSSS bonds with reduced regulatory costs and expedited market access, similar to the streamlined process available for raising additional capital under the Financial Markets Conduct Act 2013 (FMC Act).
Details of the proposed exemption
The proposed exemption would enable issuers to offer GSSS bonds that are similar to their existing quoted bonds – differing only in interest rate, redemption date, and GSSS status – without preparing a full Product Disclosure Statement (PDS). This initiative is based on the premise that the new GSSS bond, being sufficiently similar to an existing quoted bond, would ensure that investors have access to appropriate information for effective market pricing and informed decision-making.
Clarifying GSSS bonds
GSSS bonds, distinct from conventional “vanilla” bonds, offer investors additional non-financial benefits linked to environmental or social objectives, such as funding environmentally friendly projects or meeting specific sustainability performance targets.
Due to their unique benefits, these bonds are not considered the “same class” as vanilla bonds, necessitating the proposed exemption for a more streamlined offering process, FMA said.
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Aim of the FMA consultation
FMA’s initiative aims to lower the regulatory hurdles for issuers of GSSS bonds, fostering greater investment in value-aligned and beneficial financial products. This aligns with the FMC Act’s goals of promoting informed market participation, ensuring access to quality information, minimising compliance costs, and encouraging innovation and flexibility in the financial markets.
Liam Mason (pictured above), FMA general counsel and executive director of evaluation and oversight, stressed the importance of industry feedback.
“We have heard from the industry the need for a more efficient route to market for these green, social, and sustainability bonds,” Mason said in a media release.
“The consultation is looking for feedback on whether our proposal provides the right balance of allowing issuers to get to market quickly and cost-effectively, while still ensuring that investors are given information that they will find timely, accurate, and valuable in making investment decisions.
“We’re keen to know where we can remove potential barriers, and work with industry to enable innovation and flexibility.”
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