Nowadays, consumers increasingly value companies that incorporate social and environmental principles in their activities. Accordingly, the stock market has not been oblivious to this trend and investors now have access to debt securities specifically associated with the financing of projects that positively impact the environment and/or certain social groups.

Consequently, with the objective of making information relative to these innovative new securities more transparent, the International Capital Market Association (ICMA) has published several texts, such as the Green and Social Bonds Principles and the Sustainable Bonds Guide.

In line with these documents, on December 30, 2022, the Bolivian Financial System Authority (ASFI) issued Circular ASFI/749/2022, which aims to adapt the current stock market regulation to this new reality. More precisely, said rule regulates the issuance of Green, Social and Sustainable Bonds in Bolivia.

The aforementioned Circular defines Green Bonds as those fixed income securities whose purpose is to finance green projects (i.e. those that seek specific environmental benefits). Moreover, Social Bonds are similar securities that allocate resources to social projects (i.e. oriented to the welfare of a determined social group).

Furthermore, Sustainable Bonds are described as fixed-income securities that aim to sponsor projects that simultaneously combine the purposes associated with both green and social projects. Namely, specific environmental benefits, combined with the well-being of a specific social group.

Green projects/social projects?

According to ASFI's criteria, green projects can be considered to be those that, for example, are oriented towards renewable energies, energy efficiency, pollution prevention and control, sustainable management of natural resources and the use of land, biodiversity conservation and clean transportation, among others.

In the same vein, the regulatory authority also points out that projects aimed at basic services infrastructure, access to essential services, affordable housing, employment generation, food safety, socioeconomic progress, and empowerment could be considered as social projects.

Key findings for companies

It is worth noting that the Circular also establishes certain obligations for those entities wishing to issue Green, Social and/or Sustainable Bonds. The following provisions stand out:

Companies wishing to issue this type of Bonds must have an express authorization to do so.

In addition to the traditional requirements for the issuance of a conventional Bond, for each issuance, companies must submit a specific request addressed to the ASFI’s Executive Director. Likewise, they must file a prior review report issued by an External Review Entity (more on External Review Entities below).

The Green, Social and/or Sustainable Bonds issuance programs must also be duly authorized.

This authorization must be processed in parallel with the authorization required for the issuance of Bonds, mentioned in the previous point.

Companies issuing this type of Bonds must submit updated information on the use of the funds obtained from the issuance, on an annual basis.

This implies that such companies must annually submit a subsequent review report, prepared by an External Review Entity.

In addition, it is worth noting that as the supervising authority, ASFI has the power to demand this information when it deems it necessary.

On the other hand, those companies interested in rendering services as External Review Entities must consider the following:

Companies intending to provide External Review services require an express permission from ASFI.

In order for External Auditing Firms to provide these services, they must also be accredited by ICMA as External Auditors, in addition to complying with a series of other requirements set forth by ASFI in the Circular.

The full text of Circular ASFI/749/2022 is available (in Spanish) here.