The Financial Markets Authority - Te Mana Tātai Hokohoko (FMA) has granted a class exemption that provides an easier pathway to market for issuers to make offers of green, social, sustainability or sustainability-linked (GSSS) bonds.
FMA Executive Director Governance, Policy and Strategy Liam Mason said, "There is increasing investor demand for products that offer environmental or social value alongside investment returns. This means there is an opportunity to grow and develop New Zealand's sustainable finance market, and for New Zealand retail investors to participate in capital raising with green or socially responsible objectives. However, during consultation with industry we heard that current disclosure requirements may be discouraging issuers from making offers of bonds with GSSS features.
"We are granting this class exemption to allow 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."
The exemption notice enables issuers to make offers of bonds that have identical features to existing quoted bonds, except for a different interest rate, redemption date and GSSS status, without the usual disclosure requirements that involve preparing a product disclosure statement.
This aligns with the Financial Markets Conduct Act 'same class' exclusion , which provides relief from disclosure requirements for offers of quoted financial products when appropriate information is already publicly available about products of the same class. It recognises there is already sufficient information for investors to make confident and informed decisions, and that the quoted products are appropriately priced by the market by the time a same class offer is made.
Since they offer an additional non-financial benefit, GSSS bonds are not the same class as regular (also known as 'vanilla') bonds with identical terms.
"Granting this exemption removes unnecessary regulatory burden, which has been an ongoing focus for the FMA. We believe that by providing relief from the time and cost required to produce a product disclosure statement, more issuers will be incentivised to offer these types of products, which will increase opportunities for New Zealanders to invest in products that align with their values, while supporting growth in New Zealand's GSSS bond market," Mr Mason said.
The exemption is subject to conditions, including that the issuer must make available to investors information about the GSSS status of the bond.
"This condition will ensure investors are still able to make informed decisions. In fact, having a separate terms sheet that is shorter and simpler may make it easier to understand and assess the GSSS features of the product."
