Financial Markets Conduct (New Zealand Local Government Funding Agency Limited Sustainable Financing Bond Offer) Exemption Notice 2023

Summary: The Financial Markets Conduct (New Zealand Local Government Funding Agency Limited Sustainable Financing Bond Offer) Exemption Notice 2023 exempts the New Zealand Local Government Funding Agency Limited (LGFA) subject to conditions, from the disclosure, governance, and financial reporting requirements in Parts 3, 4 and 7 of the Financial Markets Conduct Act 2013 (the Act) in relation to offers of “sustainable” “sustainability” “sustainability-linked” “green” “social” or similar bonds (Sustainable Financing Bonds)  issued under LGFA’s Sustainable Financing Bond Framework.

The effect of the exemptions is that LGFA will be able to offer the Sustainable Financing Bonds on a similar basis to an offer made in reliance on clause 19 of Schedule 1 of the Act (the same class offer exclusion).

The exemptions are subject to conditions that are consistent, as far as practicable, with the requirements of clause 19 of Schedule 1 of the Act and clauses 19 to 22 and clause 46 of Schedule 8 of the Financial Markets Conduct Regulations 2014 (which relate to the same class offer exclusion).  Additionally, the exemptions will be subject to conditions that create tailored disclosure requirements for the Sustainable Financing Bond offering that particularly focuses on the sustainable features of the bonds, in line with the FMA’s principles set out in the Integrated Financial Product Framework.

Our approach to exemptions of this nature continues to evolve over time, particularly with respect to the accompanying requirements and conditions.  We are continuing to monitor developments in the New Zealand bond market relating to green/sustainable bonds, including how individual exemptions are used by offerors, to identify whether any changes to our policy approach are necessary.  For example, as the market for green bonds develops and different kinds of assurance/external review emerge, our approach now includes conditions aimed at improving investors’ understanding of the type of third party review which has been applied to the bonds they are considering investing in, so they can more easily compare that potential investment to others in the market.