April 1, 2022
Pioneer hybrid rice producer SL Agritech Corp. (SLAC) has become the Philippines’ first private corporation issuer of a social finance instrument with a P2 billion corporate note considered a “sustainable” or “social” financing owing to its socio-economic benefits.
Issuance to be managed and arranged by MIB Capital Corp., the social finance instrument will support SLAC’s continuing expansion which has become critical as it pursues Philippines’ food security goals.
“We are very proud to be the first receiver of a social finance instrument in the Philippines,” said SLAC Chairman Henry Lim Bon Liong in an investors’ meeting Wednesday.
SLAC’s financing has merited the approval of DNV Business Assurance Pty. Ltd., according to Thomas Leonard of DNV during the same investors’ meeting.
DNV made a second party opinion assuring such fund will enable to raise capital for a project that has “social” benefits. The funds will be drawn in one or more tranches over three years.
DNV affirmed that “SLAC currently meets the criteria established in its Eligibility Assessment Protocol (that is) aligned with the stated definition of social bonds and loans.”
Konsintr Puongsophol, Asian Development Bank (ADB) financial sector specialist, said that there has been a steadily increasing demand for sustainable bonds such as SLAC’s social finance instrument. He said during the investors’ meeting that global sustainable bonds doubled to $1,478.6 billion in 2021 from $745.4 billion in 2020.
“Globally the volume of labelled sustainable finance products is not keeping up with investor demand. All deals are seeing oversubscription and more favorable issuance,” said Puongsophol.
ADB extends technical assistance to support issuers of sustainable bonds. The bonds should be issued in the local currency, Philippine peso, of ASEAN Plus 3 markets.
SLAC has engaged in a continuing expansion every two years. Its hybrid rice plant production and seed processing sites including expansion sites are in Talavera, Nueva Ecija; Banay Banay, Davao Oriental; Victoria, Tarlac; and Matanao, Davao del Sur.
“Through our plant expansion program, we are able to help more farmers and provide employment to those in the agricultural sector. We are contributing to the economic growth in the target locations and nearby rural communities,” said Lim.
Lim stressed the significance of Philippines’ pursuing food sufficiency especially at the height of today’s crisis.
“Both oil and food are very important for us. Right now, during this Russia war, the price of wheat and food has risen. There is a good opportunity for farmers to plant and yield more for us to be self-sufficient. In this season, we have to be self-sufficient in food,” he said.
A review and finalization of the terms of the note will be done from April 18 to 27, 2022. Signing of the financing facility will be on May 2. The social financing instrument will be made available to a limited number –19 primary institutional lenders.
SLAC has recently established its Social Finance Framework (SFF) and Corporate Social and Sustainability Committee to oversee socio-economic development projects.
Its SFF is aligned with International Capital Market Association Social Bond Principles (ICMA SBP) and ASEAN Capital Markets Forum ASEAN Social Bond Standards (ASBS), said Thomas Leonard of DNV.
The following are SLAC’s socially eligible projects :
1. Contract growing program for rice and hybrid seeds (Buyback Scheme for Rice and Seeds). SLAC provides farmers in advance with inputs, tools, and technology – seeds, fertilizers to ensure good harvest. SLAC buys back farmers’ harvest at prevailing price plus a premium at assures net income of farmers.
2. Hybrid Rice Technology Demonstration Program. This is a nationwide farmers’ education program that guides farmers on implementing farming technology using hybrid seeds from planting to harvesting.
3. Research and development of hybrid seed varieties. This is a continuous program for improving seed varieties in terms of yield, good tasting quality, and pest resistance to ensure a sustainable food system.
4. Harvest Performance Award (Harvest Festivals) to motivate farmers to raise yield and productivity. The Masaganang Ani 300 provides social recognition and financial rewards for farmers if they meet the potential optimum yield of hybrid seeds set at 300 cavans per hectare.
5. Plant Expansion Programs aimed at generating more employment for farmers and agricultural sector, promoting economic growth in rural communities. (Melody Mendoza Aguiba)