Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Amend the NYSE Listed Company Manual To Adopt Listing Standards for Natural Asset Companies, 68811-68819 [2023-22041]
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tradingandmarkets@sec.gov or 202–
551–5777.
FICC reserves the right to not respond
to any comments received.
III. Date of Effectiveness of the
Proposed Rule Change, and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FICC–2023–014 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–FICC–2023–014. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
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Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of FICC and on DTCC’s website
(dtcc.com/legal/sec-rule-filings). Do not
include personal identifiable
information in submissions; you should
submit only information that you wish
to make available publicly. We may
redact in part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–FICC–2023–014 and
should be submitted on or before
October 25, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.40
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21938 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
68811
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98665; File No. SR–NYSE–
2023–09]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Amend the NYSE Listed Company
Manual To Adopt Listing Standards for
Natural Asset Companies
September 29, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on
September 27, 2023, New York Stock
Exchange LLC (the ‘‘Exchange’’ or
‘‘NYSE’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE Listed Company Manual
(‘‘Manual’’) to adopt a new listing
standard for the listing of Natural Asset
Companies. The proposed rule change is
available on the Exchange’s website at
40 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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The Exchange proposes to adopt a
new subsection of Section 102 of the
Manual (to be designated Section
102.09) to permit the listing of common
equity securities of Natural Asset
Companies (or ‘‘NACs’’).
For purposes of proposed Section
102.09, a NAC is a corporation whose
primary purpose is to actively manage,
maintain, restore (as applicable), and
grow the value of natural assets and
their production of ecosystem services.
In addition, where doing so is consistent
with the company’s primary purpose,
the company will seek to conduct
sustainable revenue-generating
operations. Sustainable operations are
those activities that do not cause any
material adverse impact on the
condition of the natural assets under a
NAC’s control and that seek to replenish
the natural resources being used. The
NAC may also engage in other activities
that support community well-being,
provided such activities are sustainable.
Introduction to NACs
The value of nature to life on earth is
readily apparent. Healthy ecosystems
produce clean air and water, foster
biodiversity, regulate the climate, and
provide the food on which our existence
depends. For purposes of this proposal,
the term ‘‘ecosystem’’ refers to specific
entities (structures, functions, and
components of the natural world) that
produce ecosystem services. These and
other benefits derived from ecosystems
are called ecosystem services, and in
aggregate, economists estimate their
value at more than US$100 trillion
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dollars per year.3 Examples of
ecosystem services include clean air,
water supply, flood protection,
productive soils for agriculture, climate
stability, habitat for wildlife, among
others.
Despite a recognition that nature is
immensely valuable, that value
generally has not been included in the
financial system. Public policy
initiatives, like regulatory carbon
markets, have made progress toward
reflecting the true cost of industrial
activities, but most environmental
values remain uncaptured by financial
reporting. Because financial markets do
not include the positive and negative
externalities related to nature’s
consumption and production,
ecosystem services are being degraded
at alarming rates. Species extinction is
proceeding at a pace never experienced
in human history.4 Fresh water
resources are being consumed and
polluted. Agriculture is contributing to
the loss of natural habitat and soil
degradation. These are significant
threats to life on earth and the economy.
Recognizing the urgency and
opportunity presented by these
conditions, investors increasingly
express a desire for investment vehicles
that will permit them to express a
sustainability thesis.5 Improvements in
corporate disclosures,6 introduction of
climate and nature-focused indices, and
the development of ESG funds screening
for preferred or prohibited factors have
all expanded the accessibility of
sustainable investing. Despite these
advances, however, investors still
express an unmet need for efficient,
pure-play exposure to nature and
climate.
Although there is significant demand
to deploy financial capital toward
3 Costanza et al (2014). Changes in the global
value of ecosystem services, Global Environmental
Change, 26, 152–158. Available at: https://doi.org/
10.1016/j.gloenvcha.2014.04.002.
4 IPBES (2019). Global assessment report on
biodiversity and ecosystem services of the
Intergovernmental Science-Policy Platform on
Biodiversity and Ecosystem Services. E. S.
Brondizio, J. Settele, S. Dı´az, and H. T. Ngo
(editors). Available at: https://doi.org/10.5281/
zenodo.3831673.
5 Global Sustainable Investment Alliance (2020).
Global Sustainable Investment Review, 2020.
Available at: https://www.gsi-alliance.org/wpcontent/uploads/2021/08/GSIR-20201.pdf.
6 The Commission has stated that a number of its
disclosure rules may require disclosure related to
climate change. Commission Guidance Regarding
Disclosure Related to Climate Change, Release No.
33–9106 (Feb. 2, 2010) 75 FR 6290 (Feb. 8, 2010).
Also, the Commission’s Division of Corporation
Finance recently reminded registrants that it
selectively reviews filings to monitor and enhance
compliance with applicable disclosure
requirements. Available at: https://www.sec.gov/
corpfin/sample-letter-climate-change-disclosures.
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sustainability, stewards of natural
landscapes have often had little choice
other than extractive development to
fund their budgets or garner a return on
investment. Capital flows directed to
biodiversity conservation, renewable
energy, regenerative agriculture, and
other direct investments needed to
facilitate a transition to a sustainable
economy are insufficient due in part to
the inability to transparently present the
economic case to access these
investment dollars based on traditional
measures for financial performance. The
financing gap for biodiversity is
estimated between US$598 and US$824
billion per year 7 and for climate change
is estimated at over US$5 trillion per
year,8 and likely an order of magnitude
larger for the transition to a more
sustainable, resilient, and equitable
economy.9
Ending the overconsumption of and
underinvestment in nature requires
bringing natural assets into the financial
mainstream. To that end, the Exchange
proposes to adopt listing standards to
introduce a new type of public company
called a NAC, a new concept pioneered
by Intrinsic Exchange Group Inc.
(‘‘IEG’’). Founded in 2017, IEG is a
private company structured as a
corporation organized under the laws of
the State of Delaware that advises public
sector and private landowners on the
creation of NAC structures and
strategies.
NACs will be corporations that hold
the rights to the ecological performance
(i.e., the value of natural assets and
production of ecosystem services)
produced by natural or working areas,
such as national reserves or large-scale
farmlands, and have the authority to
manage the areas for conservation,
restoration, or sustainable management.
These rights can be licensed like other
rights, including ‘‘run with the land’’
7 Deutz, A., Heal, G. M., Niu, R., Swanson, E.,
Townshend, T., Zhu, L., Delmar, A., Meghji, A.,
Sethi, S. A., and Tobinde la Puente, J. 2020.
Financing Nature: Closing the global biodiversity
financing gap. The Paulson Institute, The Nature
Conservancy, and the Cornell Atkinson Center for
Sustainability. Available at: https://
www.nature.org/en-us/what-we-do/our-insights/
reports/financing-nature-biodiversity-report/.
8 Boehm, S., K. Lebling, K. Levin, H. Fekete, J.
Jaeger, R. Waite, A. Nilsson, J. Thwaites, R. Wilson,
A. Geiges, C. Schumer, M. Dennis, K. Ross, S.
Castellanos, R. Shrestha, N. Singh, M. Weisse, L.
Lazer, L. Jeffery, L. Freehafer, E. Gray, L. Zhou, M.
Gidden, and M. Gavin. 2021. State of Climate
Action 2021: Systems Transformation Required to
Limit Global Warming to 1.5 °C. Washington, DC:
World Resources Institute: https://doi.org/10.46830/
wrirpt.21.00048.
9 Force for Good (2021). Capital as a Force for
Good, 2021 Report. Available at: https://
www.forcegood.org/frontend/img/2021_report/pdf/
Funding_the_SDGs_and_a_Sustainable_
Future.pdf#toolbar=0 Chapter 2.
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rights (such as mineral rights, water
rights, or air rights), and NACs are
expected to license these rights from
sovereign nations or private
landowners.
Under the proposed amendments to
the Manual, capital raised through an
NYSE-listed NAC’s initial public
offering or follow-on offerings must be
used to implement the conservation,
restoration, or sustainable management
plans articulated in its prospectus, fund
its ongoing operations, or otherwise
fulfill its purpose to maximize
ecological performance (i.e., the value of
natural assets and the production of
ecosystem services). While a core
purpose of a NAC is to maximize
ecological performance, under the
proposed rules, a NAC would also be
required to seek to conduct sustainable
revenue-generating operations (e.g., ecotourism in a natural landscape or
production of regenerative food crops in
a working landscape) provided that
such operations are consistent with the
NAC’s charter and do not cause any
material adverse impact on the
condition of the natural assets under the
NAC’s control and seek to replenish the
natural resources being used. Therefore,
all NACs are prohibited from directly or
indirectly conducting unsustainable
activities, such as mining, that lead to
the degradation of the ecosystems it is
trying to protect. In conducting its
revenue-generating operations, a NAC
could monetize ecosystem services that
have markets (e.g., through the sale of
carbon credits). All revenues and
expenses would be reported in the
financial statements of the NAC
prepared under generally accepted
accounting principles (‘‘GAAP’’) and
filed with the SEC as part of the NAC’s
required annual report on Form 10–K,
20–F or 40–F, as applicable. In order to
align the interests of local communities
with the objectives of maximizing the
value of natural assets and the
production of ecosystem services, a
NAC would also be able to use its funds
for activities that support local
community well-being (e.g., education,
health), provided that such activities are
sustainable.
Because of the distinct purpose of a
NAC (to protect and grow the natural
assets under its management), the
Exchange proposes to require NACs to
publish on a periodic basis information
on the ecological performance of the
natural assets licensed to a NAC. This
information will be presented in an
Ecological Performance Report (an
‘‘EPR’’).
The EPR provides statistical
information on the biophysical
measures (e.g., tons of carbon, acre feet
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of water produced), condition, and
economic value of each of the ecosystem
services produced by the natural assets
managed by the NAC. This will allow
investors to gauge the effectiveness of
management. The information will be
consistently produced and periodically
reported, following best practices from
accepted valuation methodologies, as
outlined in the Reporting Framework (as
defined below).
The EPR produced by a NAC must
follow IEG’s Ecological Performance
Reporting Framework (the ‘‘Reporting
Framework’’). The Framework, in turn,
is based on the natural capital
accounting standards established in the
United Nations System of
Environmental-Economic Accounting—
Ecosystem Accounting Framework
(‘‘SEEA EA’’).10 The EPR will measure,
value, and report on the ecosystem
services and natural assets managed by
a NAC. Under the proposed
amendments to the Manual, NACs will
conduct a Technical Ecological
Performance Study (‘‘Technical EP
Study’’) annually, following the
Reporting Framework. This Technical
EP Study will generate the information
used to prepare and publish the EPR.
The EPR and Technical EP Study must
be examined and attested to by a public
accounting firm that is registered with
the Public Company Accounting
Oversight Board (‘‘PCAOB’’) and is
independent from the NAC and NAC
licensor, if applicable, under the
independence standard set forth in Rule
2–01 of Regulation S–X (‘‘Independent
Reviewer’’).
In addition to the GAAP financial
statements required under SEC
disclosure rules and the proposed EPR
that would be derived from a Technical
EP Study, NYSE proposes to require
NACs to provide a number of unique
website disclosures designed to provide
transparency on the NAC’s social and
environmental objectives. These include
requiring NACs to adopt and publish an
Environmental and Social Policy, a
Biodiversity Policy, a Human Rights
Policy, consistent with the United
Nations Guiding Principles on Business
and Human Rights,11 and an Equitable
Benefit Sharing Policy.
Finally, the NAC will be required
under applicable SEC rules to disclose
10 United Nations et al (2021). System of
Environmental-Economic Accounting—Ecosystem
Accounting. White cover publication, pre-edited
text subject to official editing. Available at: https://
seea.un.org/ecosystem-accounting.
11 United Nations (2011). Guiding principles on
business and human rights: Implementing the
United Nations ‘‘Protect, Respect and Remedy’’
framework. Available at: https://www.ohchr.org/
sites/default/files/documents/publications/
guidingprinciplesbusinesshr_en.pdf.
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all material information about its license
with a natural asset owner (including
any material amendments to the license
over time) in the registration statement
filed in connection with its IPO and in
its subsequent periodic SEC filings.
Relationship Between the NYSE and
IEG
The Exchange and IEG have entered
into an agreement pursuant to which
IEG has granted the Exchange an
exclusive license in the United States to
use the Reporting Framework in
connection with the listing of NACs on
the Exchange (although the Reporting
Framework will remain proprietary to
IEG). Under the terms of the agreement,
the Exchange has acquired a small
minority interest in IEG and one seat on
IEG’s board of directors. IEG has agreed
to seek to identify and develop NACs for
listing on the Exchange, in addition to
marketing the listing and trading of
NACs on the Exchange and providing
training with respect to the NAC
structure and the Reporting Framework
to NYSE personnel and currently listed
and potential listed NACs. IEG will be
entitled to a share of the revenues
generated by the Exchange from the
listing and trading of NACs on the
NYSE.
While IEG will seek to promote the
listing of NACs on the NYSE, the
determination of the suitability for
listing of any applicant NACs will solely
be made by the staff of NYSE Regulation
and IEG will have no role in the listing
qualification process. In evaluating a
NAC for listing, the staff of NYSE
Regulation intends to follow the same
procedure it utilizes in qualifying
operating companies. NYSE Regulation
staff will review disclosures contained
in a NAC’s registration statement and its
audited financial statements to ensure
that the NAC satisfies applicable
quantitative, qualitative and corporate
governance listing standards. On a
continued listing basis, NYSE
Regulation staff will review a NAC’s
periodic reports filed with the
Commission as well as public disclosure
to ensure that a NAC continues to meet
applicable listing standards.
Definitions of Key Terms Used in This
Proposal, in the Context of a NAC
Unless otherwise stated, this
document utilizes the definitions of the
United Nations’ System of
Environmental-Economic Accounting—
Ecosystem Accounting (‘‘SEEA EA’’).12
12 United Nations et al (2021). System of
Environmental-Economic Accounting—Ecosystem
Accounting (SEEA EA). White cover publication,
pre-edited text subject to official editing. Available
at: https://seea.un.org/ecosystem-accounting.
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68813
In addition, there are terms unique to
Natural Asset Companies, defined
below:
Community Well-being—Refers to the
combination of social, economic,
environmental, cultural, and political
conditions of individuals and their
communities as essential for them to
flourish and fulfil their potential.13
Ecological Performance—The value of
natural assets and the production of
ecosystem services.
Ecological Performance Report—A
report with statistical information on
the ecological performance of a NAC,
including sections with data on (i)
Natural Production, (ii) Natural Assets,
and (iii) Underlying Asset Condition.
The EPR is unique to NACs and will be
provided in addition to traditional
financial statements.
• Natural Production Section—A
section of the EPR that provides
information on the annual flows of
ecosystem services managed by a NAC.
• Natural Assets Section—A section
of the EPR that provides information on
the net present value of natural assets
producing ecosystem services managed
by a NAC.
• Underlying Asset Condition
Section—A section of the EPR that
provides biophysical information on the
extent and condition of the ecosystems
being managed by the NAC.
Ecological Performance Rights—The
rights to the value of natural assets and
the production or ecosystem services in
a designated area, including the
authority to manage the area. These
rights are granted to a NAC, from a
natural asset owner, as provided
through a license agreement.
Ecosystem Service Valuation—The
assignation of an economic value to an
ecosystem service using one of many
valuation methodologies accepted
today.
IEG Ecological Performance Reporting
Framework—IEG has developed a
specific framework for NACs to derive
and report on ecosystem service values
and on the quality of the natural assets
being managed. In addition, the
Reporting Framework defines the
components and structure of the EPR to
ensure the values are reported
transparently and consistently.
Independent Reviewer—A public
accounting firm registered with the
PCAOB independent of a NAC and,
where applicable, a NAC’s licensor.
Local Communities—refers to groups
of people—including indigenous
13 Wiseman, J., Brasher, K (2008) Community
wellbeing in an unwell world: trends, challenges,
and possibilities. Journal of Public Health Policy,
29: 353–366.
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peoples and other local groups—who
have direct ties to and derive livelihood
or cultural values from the area to
which the NAC holds the license.
Natural Assets—A statistical
representation of ecosystems for
accounting purposes that defines them
as productive units of ecosystem
services. The term ‘‘Natural Assets’’ is
equivalent to SEEA EA’s term
‘‘ecosystem assets.’’ Natural assets can
be monetized directly or indirectly. Like
traditional assets, they have economic
value and are expected to provide future
streams of benefits. In the singular form,
the term refers to an ecosystem type
(e.g., a delineated forest).
Natural Asset Companies (NACs)—
Corporations that hold the rights to the
ecological performance of a defined area
and have the authority to manage the
areas for conservation, restoration, or
sustainable management.
Sustainable Activities—From an
ecological perspective, activities that do
not cause any material adverse impact
on the condition of ecosystems, and that
seek to replenish the natural resources
being used.
Unsustainable Activities—From an
ecological perspective, activities that
cause material adverse impact on the
condition of ecosystems, and extract
resources without replenishing them.
The IEG Reporting Framework
IEG has developed a Reporting
Framework for NACs to measure and
value natural assets and define how the
EPR should be structured to ensure
transparency, robustness, and
consistency in the reporting of values
and other statistical information
disclosed.
The Reporting Framework to be used
by NACs is based on the standards
developed in SEEA EA. SEEA EA
provides the most comprehensive
guidance on natural capital accounting
and is of particular relevance to the
valuation of NACs due to its spatial
approach and its focus on measuring
and reporting on the ecosystem services
produced by ecosystems.
IEG adopted SEEA EA as the
accounting standard for the
measurement and valuation of natural
assets and ecosystem services, with
some minor adaptations to ensure that
the natural asset valuations of NACs
provide comprehensive,
understandable, consistent, robust, and
transparent information to investors and
other users of the companies EPR. The
Reporting Framework includes
specifications on how to apply SEEA EA
to report on the annual performance of
NACs. In particular, the Reporting
Framework sets up NACs to report the
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Total Economic Value (‘‘TEV’’) of
natural assets, which is in line with the
recommendations of the British
Standard for natural capital accounting
(BS 8632) for financial organizations
and the ISO Standard 14008.
Given that NACs are designed to
manage and grow the value of natural
assets and the production of ecosystem
services—a NAC’s activities are not well
captured solely by traditional financial
reporting standards like GAAP/IFRS, as
most ecosystem services are not
monetized today. To account for and
capture the value of the non-monetized
ecosystem services, NACs will be
required to conduct an annual
Technical EP Study, adhering to IEG’s
Reporting Framework, in order to
prepare their EPR. The Reporting
Framework defines:
• the steps to characterize, measure
and value the ecosystem service and
natural asset values in a Technical EP
Study, and
• the components and structure of the
EPR including guidance to compile its
sections, to ensure transparency,
robustness, and consistency in the
reporting of information about the
natural assets.
The Reporting Framework (which
provides instructions for the preparation
of the EPR) will be publicly accessible
on nyse.com.14
The Exchange, in consultation with
IEG, will have sole authority to
determine whether and how to propose
amendments to the Reporting
Framework from time to time. Any
proposed change to the Reporting
Framework will have the effect of a
change to an Exchange rule and will
therefore be filed by the Exchange with
the Commission pursuant to Section
19(b) of the Act. Additionally, the
Exchange will maintain on nyse.com a
publicly-accessible copy of of the
Reporting Framework.
Proposed Listing Rules
Required Corporate Documents
1. Charter
Each NAC must file its charter as an
exhibit to its registration statement. As
a condition to initial listing, the NYSE
proposes to require a NAC’s charter to
state the following:
1. The purpose of the company is to
actively manage, maintain, restore (as
applicable), and grow the value of
natural assets and their production of
ecosystem services. In addition, where
doing so is consistent with the
company’s primary purpose, the
14 The text of the Framework is included [sic] in
Exhibit 3 to this filing.
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company will seek to conduct
sustainable revenue-generating
operations. Sustainable operations are
those activities that do not cause any
material adverse impact on the
condition of the natural assets under its
control, and that seek to replenish the
natural resources being used. The
sustainability of the revenue-generating
operations will be determined based on
the impacts of their activities on the
condition metrics, and where
applicable, on any capacity-to-produce
indicators reported by a NAC in its EPR.
Condition metrics should not show
degradation as a result of these activities
and capacity-to-produce indicators
should be moving to a rate where
resource extraction is less than resource
replenishment. The NAC may also
engage in other activities that support
community well-being, provided such
activities are sustainable.
2. NAC funds (including any proceeds
from the sale of the company’s
securities at any time) must be used
primarily to meet the NAC’s operational
needs to fulfill its purpose. In addition,
funds may be used to support
community well-being, provided such
activities are sustainable.
3. The NAC will be prohibited from
engaging directly or indirectly in
unsustainable activities. These are
defined as activities that cause any
material adverse impact on the
condition of the natural assets under its
control, and that extract resources
without replenishing them (including,
but not limited to, traditional fossil fuel
development, mining, unsustainable
logging, or perpetuating industrial
agriculture). The NAC will be
prohibited from using its funds to
finance such unsustainable activities.
If any of the foregoing provisions of
the NAC’s charter are eliminated or
materially amended in a manner that is
inconsistent with their required form at
any time, the NAC will be subject to
delisting from the NYSE.
2. License Agreements
NACs will acquire the ecological
performance rights of a designated area
by entering into an agreement with the
natural asset owner (e.g., a
governmental entity or private
landowner) to obtain a license with
respect to such rights.15 The Exchange
proposes that all material terms of the
15 The Exchange notes that it will be important for
NACs in their offering materials and subsequent
public disclosure documents to be clear in
distinguishing the rights to the land ownership and
geographic area from the rights to the ecological
performance and to clearly specify, where
appropriate, the limits of the NAC’s rights as an
owner or licensee.
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applicable license agreement be
publicly disclosed in the NAC’s
periodic filings consistent with SEC
rules. At minimum, the NAC will be
required to disclose the following
information about any license
agreement:
a. Term: At the time of initial listing,
the term of any license agreement must
be a minimum of ten years from the date
of closing of the NAC’s initial public
offering (the Exchange expects that most
license agreements will have terms
significantly longer than ten years and,
in some cases, may be perpetual);
b. Scope: The specific natural assets
and ecosystem services covered by the
license agreement;
c. License Payments: The amount and
terms of any ongoing payments due
from the licensee to the licensor;
d. Modification Provisions: The
circumstances under which a license
agreement may be modified and the
procedures for effecting any such
modification;
e. Termination Provisions: The
circumstances under which a license
agreement may be terminated, including
the rights and obligations of all parties
to the license agreement, and the
procedures for effecting any such
termination.
The proposed rule would specify that
any NAC whose license is terminated or
materially breached by either party
would be subject to delisting.
3. NAC Policies
Proposed Section 102.09 of the
Manual provides that a NAC seeking to
list on the NYSE must adopt the
following written polices (collectively,
the ‘‘NAC Policies’’) and post them on
its website by the earlier of the date that
the NAC’s initial public offering closes
or five business days following the
NAC’s initial listing date:
1. An Environmental and Social
Policy that articulates the objectives and
principles that will guide the NAC to
achieve sound environmental and social
performance. Such policy must include
requirements to conduct a process of
environmental and social assessment,
and establish, as soon as practicable
after listing, an Environmental and
Social Management System (‘‘ESMS’’).16
The ESMS should be designed to:
(i) Identify and assess environmental
and social risks and impacts,
(ii) Identify measures to avoid,
minimize and mitigate the negative risks
and impacts, and
16 The
ESMS should be consistent with generally
accepted international standards, such as the ‘‘IFC
Performance Standard 1: Assessment and
Management of Environmental and Social Risks and
Impacts.’’
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(iii) Promote improved environmental
and social performance.
2. A Biodiversity Policy that
articulates a commitment to achieving
no net loss, and where possible a net
positive impact on biodiversity. The
Biodiversity Policy should be based on
the mitigation hierarchy, a planning and
management approach for addressing
impacts to biodiversity and ecosystem
services through avoidance,
minimization, restoration, and
offsetting.
3. A Human Rights Policy that
articulates a commitment to human
rights, consistent with the United
Nations Guiding Principles on Business
and Human Rights,17 including a
commitment to recognize and respect
people’s rights in accordance with
customary, national, and international
human rights laws, in particular those of
indigenous peoples.
4. An Equitable Benefit Sharing Policy
that articulates the NAC’s commitment
for sharing benefits with local
communities. A NAC must include in
its license agreement with the licensor
a provision requiring the licensor to
comply with the applicable terms of the
Equitable Benefit Sharing Policy.
The Equitable Benefit Sharing Policy
must require an equitable benefit
sharing arrangement for the distribution
of shares of the NAC’s common stock to
local communities (i.e., those who have
direct ties to and derive livelihood or
cultural values from the applicable
area). The NAC’s common stock
distribution must be completed no later
than the time of closing of the NAC’s
IPO and must meet the following
requirements at a minimum:
• If the NAC has entered into a
license agreement with respect to public
lands, shares representing at least 50%
of the shares of the NAC’s outstanding
shares as of the closing of the IPO must
be distributed to local communities.
• If the NAC has entered into a
license agreement with respect to
private lands, shares representing at
least 5% of the shares of the NAC
outstanding as of the closing of the IPO
must be distributed to local
communities.
The foregoing distributions of shares
of common stock may be placed in a
trust or equivalent structure, for the
benefit of the intended beneficiaries.
Any trust (or equivalent) holding shares
of the NAC for this purpose must be
under the majority control of trustees
17 United Nations (2011). Guiding Principles on
Business and Human Rights: Implementing the
United Nations ‘‘Protect, Respect and Remedy’’
Framework. Available at: https://www.ohchr.org/
documents/publications/guidingprinciples
businesshr_en.pdf.
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that are fully independent of both the
NAC and, where applicable, the
licensor, and/or be representative of the
intended beneficiaries.
The Equitable Benefit Sharing Policy
must provide that the NAC will (a)
deposit its cash and other financial
assets in accounts with a bank custodian
regulated by the U.S. Office of the
Comptroller of the Currency (an
‘‘Authorized Bank’’); and (b) include in
its license agreement a provision
requiring the licensor to place any
shares of the NAC it owns in the
custody of an Authorized Bank and
deposit the proceeds from any NAC
share sales by the licensor and any
distributions received from the NAC in
accounts with an Authorized Bank,
pending the distribution of such assets
in a manner consistent with the NAC’s
Equitable Benefit Sharing Policy.
The NAC must review the adequacy
of the Equitable Benefit Sharing Policy
at least annually and publish on its
website a detailed description of its
activities in accordance with such
policy (the ‘‘Annual EBS Report’’) no
later than 90 days after the end of each
fiscal year.
The Annual EBS Report must be
examined by an Independent Reviewer
(the ‘‘EBS Independent Reviewer’’) and
be accompanied by an examination
level report (i.e., reasonable assurance)
regarding the NAC and, if applicable,
the licensor, in accordance with the
Equitable Benefits Sharing Policy during
the applicable fiscal period, including a
review of the accounts maintained by
the NAC and the licensor at Authorized
Banks, in accordance with the PCAOB
or AICPA’s attestation standards.
The NAC’s accordance with the
requirements of its Equitable Benefits
Sharing Policy must be reviewed
periodically either by (i) a committee
consisting solely of directors who meet
the independence requirements of
Section 303A of the Manual or (ii) the
NAC’s independent directors acting as a
group. Such committee or the
independent directors, as the case may
be, must meet for this purpose at least
annually and such meeting must
include an executive session in which
management does not participate and a
discussion with the EBS Independent
Reviewer at which management must
not be present.
4. Ecological Performance Report
Proposed Section 102.09 will provide
that, prior to its initial listing, the NAC
must make publicly available an EPR
that has been prepared consistent with
the Reporting Framework. The
Reporting Framework (including
instructions for the preparation of the
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EPR and templates for the EPR) will be
posted on nyse.com and is attached
hereto [sic] as Exhibit 3. NACs will
conduct a Technical EP Study annually,
following the Reporting Framework,
which will generate the information
used to prepare and publish the EPR.
Both the Technical EP Study and EPR
must be examined by an Independent
Reviewer annually. The EPR must be
accompanied by an examination level
report (i.e., reasonable assurance)
prepared by such Independent Reviewer
in accordance with the PCAOB or
AICPA’s attestation standards.
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Quantitative and Corporate Governance
Listing Rules
To qualify for listing as a NAC, an
applicant issuer would be required to
meet the quantitative listing
requirements applicable to the listing of
common equities of operating
companies as set forth in Sections
102.01(A), (B), and (C) of the Manual.
Proposed Section 102.09(G) would
provide that listed NACs would be
subject to all of the continued listing
requirements that are applicable to
operating companies listed under
Sections 102 and 103 of the Manual.
Audit Committee
As described above, a listed NAC
would be subject to all of the corporate
governance requirements set forth in
Section 303A.00, including the
requirement of Section 303A.06 that a
company must have an independent
audit committee and the provisions of
Section 303A.07 setting forth additional
requirements for the audit committee.
The Exchange proposes to amend
Section 303A.07 to establish additional
responsibilities specific to the audit
committee of a NAC. As proposed,
Section 303A.07 would require that (in
addition to the requirements of Section
303A.07(b)), the NAC’s audit committee
charter must address the following:
1. That the audit committee’s purpose
includes assisting board oversight of (1)
the integrity of the NAC’s EPR, (2) the
qualifications and independence of the
Independent Reviewer and (3) the
performance of the Independent
Reviewer.
2. The audit committee of the NAC
must:
(i) at least annually, obtain and review
a report by the Independent Reviewer
describing: the Independent Reviewer’s
internal quality-control procedures; any
material issues raised by the most recent
internal quality-control review, or peer
review, of the Independent Reviewer, or
by any inquiry or investigation by
governmental or professional
authorities, within the preceding five
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years, respecting one or more
independent audits carried out by the
Independent Reviewer, and any steps
taken to deal with any such issues; and
(to assess the Independent Reviewer’s
independence) all relationships between
the Independent Reviewer and the NAC.
After reviewing the foregoing report and
the Independent Reviewer’s work
throughout the year, the audit
committee will be in a position to
evaluate the Independent Reviewer’s
qualifications, performance, and
independence. This evaluation should
include the review and evaluation of the
lead partner of the Independent
Reviewer. In making its evaluation, the
audit committee should take into
account the opinions of management
and the NAC’s internal auditors (or
other personnel responsible for the
internal audit function). In addition to
assuring the regular rotation of the lead
partner responsible for the EPR Review,
the audit committee should further
consider whether, in order to assure
continuing independence of the
Independent Reviewer, there should be
regular rotation of the firm undertaking
the EPR Review itself. The audit
committee should present its
conclusions with respect to the
Independent Reviewer to the full board
and meet to review and discuss the
NAC’s annual EPR. Meetings may be
telephonic if permitted under applicable
corporate law; polling of audit
committee members, however, is not
permitted in lieu of meetings.
(ii) meet separately, periodically, with
management and the Independent
Reviewer to discuss the EPR and the
conduct of the EPR Review. To perform
its oversight functions most effectively,
the audit committee must have the
benefit of separate sessions with
management and the Independent
Reviewer. These separate sessions may
be more productive than joint sessions
in surfacing issues warranting
committee attention.
(iii) review with the Independent
Reviewer any problems in the conduct
of their review or difficulties and
management’s response. The audit
committee must regularly review with
the Independent Reviewer any
difficulties the Independent Reviewer
encountered in the course of its review,
including any restrictions on the scope
of the Independent Reviewer’s activities
or on access to requested information,
and any significant disagreements with
management.
(iv) set clear hiring policies for
employees or former employees of the
Independent Reviewer. Employees or
former employees of the Independent
Reviewer may be valuable additions to
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the NAC’s management. Such
individuals’ familiarity with the
business, and personal rapport with the
employees, may be attractive qualities
when filling a key opening. However,
the audit committee should set hiring
policies taking into account the
pressures that may exist for personnel of
the Independent Reviewer consciously
or subconsciously seeking a job with the
NAC they review.
(v) report regularly to the board of
directors with respect to the preparation
of the EPR and the performance of the
Independent Reviewer. The audit
committee should review with the full
board any issues that arise with respect
to the quality or integrity of the EPR or
the performance and independence of
the Independent Reviewer.
Material News
A NAC will be required to
immediately disclose, pursuant to the
Exchange’s immediate release policy set
forth in Sections 202.05 and 202.06 of
the Manual, any event (e.g., a forest fire)
that is anticipated to have a material
adverse effect with respect to any of the
criteria included in the EPR. As soon
thereafter as possible, the NAC must
disclose in a Form 8–K or Form 6–K, as
applicable, its estimates of the changes
to the previously presented EPR of such
event.
Periodic Publication of EPR and
Occurrence of a Late EPR Delinquency
Each year after initial listing, a NAC
must publish on its public website an
EPR that has been prepared consistent
with the Reporting Framework. The
Technical EP Study and EPR must be
examined by the Independent Reviewer.
The EPR must be accompanied by an
examination level report prepared by
such Independent Reviewer in
accordance with the PCAOB or AICPA’s
attestation standards. The EPR must
cover the same fiscal periods as the
audited financial statements included in
the NAC’s annual report on Form 10–K,
Form 20–F, or Form 40–F, as applicable.
The NAC should utilize its best efforts
to publish its annual EPR no later than
the filing of its annual report on Form
10–K, Form 20–F, or Form 40–F, as
applicable. In the event that the annual
EPR is not completed by the filing due
date of the NAC’s annual report on
Form 10–K, Form 20–F, or Form 40–F,
as applicable, such annual EPR is
required to be published no later than
180 days after the end of the fiscal year
to which such annual EPR relates (the
‘‘NAC EPR Due Date’’ and the failure of
a listed NAC to timely publish its
annual EPR, a ‘‘NAC Late EPR
Delinquency’’). In the event that the
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company is unable to file its Form 10–
K, Form 20–F, or Form 40–F, as
applicable, by the NAC EPR Due Date,
the company should not delay the
publication of its EPR, but rather should
publish its EPR on or before that date.
Upon the occurrence of a NAC Late
EPR Delinquency, the Exchange will
promptly send written notification (the
‘‘NAC Late EPR Delinquency
Notification’’) to an affected NAC of the
procedures set forth below. Within five
days of the date of the NAC Late EPR
Delinquency Notification, the company
will be required to (a) contact the
Exchange to discuss the status of the
delinquent annual EPR (the ‘‘Delinquent
NAC EPR’’) and (b) issue a press release
disclosing the occurrence of the NAC
Late EPR Delinquency, the reason for
the NAC Late EPR Delinquency, and, if
known, the anticipated date such NAC
Late EPR Delinquency will be cured via
the publication of the Delinquent NAC
EPR. If the company has not issued the
required press release within five days
of the date of the NAC Late EPR
Delinquency Notification, the Exchange
will issue a press release stating that the
company has incurred a NAC Late EPR
Delinquency and providing a
description thereof.
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NAC Non-Reliance Event
In the event that a NAC concludes
that its previously issued EPR should no
longer be relied upon because of an
error in such EPR (a ‘‘NAC NonReliance Event,’’ and the disclosure of
such NAC Non-Reliance Event, a ‘‘NAC
Non-Reliance Disclosure’’), it will be
required to comply with the NAC Late
EPR Delinquency Notification
procedures set forth above. If the NAC
does not publish an amended EPR
within 60 days of the issuance of the
NAC Non-Reliance Disclosure (an
‘‘Extended NAC Non-Reliance
Disclosure Event’’ and, together with a
NAC Late EPR Delinquency, a ‘‘NAC
Reporting Delinquency’’) for purposes of
the cure periods described below a NAC
Reporting Delinquency will be deemed
to have occurred on the date of original
issuance of the NAC Non-Reliance
Disclosure. If the Exchange believes that
a NAC is unlikely to publish the
amended EPR within 60 days after a
NAC Non-Reliance Disclosure or that
the errors giving rise to such NAC NonReliance Disclosure are particularly
severe in nature, the Exchange may, in
its sole discretion, determine earlier
than 60 days that the applicable NAC
has incurred a NAC Publication
Delinquency as a result of such NAC
Non-Reliance Disclosure.
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Cure Periods for NAC Publication
Delinquencies
During the six-month period from the
date of the NAC Publication
Delinquency (the ‘‘Initial NAC EPR Cure
Period’’), the Exchange will monitor the
company and the status of the
Delinquent NAC EPR, including through
contact with the company, until the
NAC Publication Delinquency is cured.
If the company fails to cure the NAC
Publication Delinquency within the
Initial NAC EPR Cure Period, the
Exchange may, in the Exchange’s sole
discretion, allow the company’s
securities to be traded for up to an
additional six-month period (the
‘‘Additional NAC EPR Cure Period’’)
depending on the company’s specific
circumstances. If the Exchange
determines that an Additional NAC EPR
Cure Period is not appropriate,
suspension and delisting procedures
will commence in accordance with the
procedures set out in Section 804.00 of
the Listed Company Manual. A NAC
will not be eligible to follow the
procedures outlined in Sections 802.02
and 802.03 with respect to these criteria.
In determining whether an Additional
NAC EPR Cure Period after the
expiration of the Initial NAC EPR Cure
Period is appropriate, the Exchange will
consider the likelihood that the
Delinquent NAC EPR can be published
during the Additional NAC EPR Cure
Period. The Exchange strongly
encourages companies to provide
ongoing disclosure on the status of the
Delinquent NAC EPR to the market
through press releases and will also take
the frequency and detail of such
information into account in determining
whether an Additional NAC EPR Cure
Period is appropriate. If the Exchange
determines that an Additional NAC EPR
Cure Period is appropriate, and the
company fails to publish the Delinquent
NAC EPR by the end of such Additional
NAC EPR Cure Period, suspension and
delisting procedures will commence
immediately in accordance with the
procedures set out in Section 804.00. In
no event will the Exchange continue to
trade a NAC’s securities if that company
has failed to cure its NAC EPR
Delinquency on the date that is twelve
months after the applicable NAC EPR
Due Date.
Filing Delinquencies and NAC EPR
Delinquencies Are Treated Separately
For purposes of Section 802.01E,
NACs will also be subject to the
provisions with respect to delinquencies
in filing periodic reports as set forth in
that rule (a ‘‘Filing Delinquency’’). A
Filing Delinquency is a separate event of
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68817
noncompliance from a NAC Publication
Delinquency. Consequently, a NAC can
be deemed to have cured a Filing
Delinquency while remaining
noncompliant due to an ongoing NAC
Publication Delinquency or vice versa.
Components and Form of the
Statements
The EPR published by NYSE-listed
NACs will consists of three components:
(1) Natural Production Section, (2)
Natural Assets Section and (3)
Underlying Asset Condition Section.
The process for conducting a
Technical EP Study and the
requirements for preparing an EPR are
contained in the Reporting Framework
which is attached hereto [sic] as Exhibit
3. NACs must conduct a Technical EP
Study and prepare and publish an EPR
that complies with the Reporting
Framework, in each case on an annual
basis.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b)(5) of the Act,18 in that it is
designed to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest, and is
not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The proposed listing standard for
NACs is consistent with the protection
of investors and the public interest
because, among other things, it includes
rigorous quantitative financial
requirements and corporate governance
requirements. Specifically, the proposed
listing standard requires NACs to meet
the same quantitative initial and
continued listing standards as are
applied to operating companies listed
on the NYSE. In addition, NACs would
be subject, without exception, to all of
the other rules applicable to NYSE
listed operating companies.
The proposed rule change is designed
to perfect the mechanism of a free and
open market in that it will facilitate the
listing and trading of an additional type
of security and will therefore enhance
competition among market participants,
to the benefit of investors and the
marketplace. There is significant and
growing interest in investing in asset
18 15
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04OCN1
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classes that are consistent with the
objective of protecting and improving
the environment. The Exchange believes
that the listing of NACs will provide
investors with an investment vehicle
that meets this demand. The Exchange
also believes that the development of
NACs will provide a source of funding
to maintain and restore natural assets.
The charter provisions each NAC
would be required to adopt under the
proposed rule are also consistent with
the protection of investors and the
public interest because they are
designed to ensure that the NAC
conducts its operations in a manner
consistent with the ecological and
socially equitable goals that would
motivate investors when investing in
the NAC. Specifically, these proposed
charter requirements would include the
following provisions:
• The purpose of the company is to
actively manage, maintain, restore (as
applicable), and grow the value of
natural assets and their production of
ecosystem services. In addition, where
doing so is consistent with the
company’s primary purpose, the
company will seek to conduct
sustainable revenue-generating
operations. Sustainable operations are
those activities that do not cause any
material adverse impact on the
condition of the natural assets under its
control, and that seek to replenish the
natural resources being used. The
sustainability of the revenue-generating
operations will be determined based on
the impacts of their activities on the
condition metrics, and where
applicable, on any capacity-to-produce
indicators reported by a NAC in its EPR.
Condition metrics should not show
degradation as a result of these activities
and capacity-to-produce indicators
should be moving to a rate where
resource extraction is less than resource
replenishment. The NAC may also
engage in other activities that support
community well-being, provided such
activities are sustainable.
• NAC funds (including any proceeds
from the sale of the company’s
securities at any time) must be used
primarily to meet the NAC’s operational
needs to fulfill its purpose. In addition,
funds may be used to support
community well-being, provided such
activities are sustainable.
• The NAC will be prohibited from
engaging directly or indirectly in
unsustainable activities. These are
defined as activities that cause any
material adverse impact on the
condition of the natural assets under its
control, and that extract resources
without replenishing them (including,
but not limited to, traditional fossil fuel
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development, mining, unsustainable
logging, or perpetuating industrial
agriculture). The NAC will be
prohibited from using its funds to
finance such unsustainable activities.
If any of the foregoing provisions of
the NAC’s charter are eliminated or
materially amended in a manner that is
inconsistent with their required form at
any time, the NAC will be subject to
delisting from the NYSE.
Similarly, the various policies that the
NAC would be required to adopt and
publicize (including an Environmental
and Social Policy, a Biodiversity Policy,
a Human Rights Policy, and an
Equitable Benefits Sharing Policy)
would protect investors by establishing
clear standards that the NAC must abide
by in seeking to address its stated
ecological and social goals.
In addition, the Exchange believes
that the examination conducted by the
Independent Reviewer with respect to
the initial and periodic EPR published
by each NAC are consistent with
investor protection and the public
interest because they are designed to
ensure that such EPR is prepared in a
manner that is consistent with the
requirements of the Reporting
Framework. Further, this thorough
independent expert examination of each
NAC’s EPR will protect investors by
providing significant assurance as to the
reliability of that EPR. The proposal
would also amend Section 802.01E of
the Manual to create non-compliance
and delisting procedures for NACs that
fail to timely publish their EPR. The
proposed requirements for the audit
committee of the NAC to oversee the
preparation of the EPR and the
performance of the Independent
Reviewer are consistent with the
protection of investors as they will help
assure the accuracy and completeness of
the EPR and the quality of the
Independent Reviewer’s review.
Similarly, as is the case with all listed
companies, NACs would be required to
immediately disclose pursuant to the
Exchange’s immediate release policy set
forth in Sections 202.05 and 202.06 of
the Manual any material event,
including any event that is anticipated
to have a material adverse effect with
respect to any of the criteria included in
the EPR (e.g., a forest fire). It is therefore
in the interests of investors to have a
rigorous rule to address delinquencies
with respect to disclosures and to
require immediate disclosure of material
events.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
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any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. A listing
under the proposed rule would be
available in a non-discriminatory way to
any company satisfying its
requirements, as well as all other
applicable NYSE listing requirements.
In addition, the Exchange faces
competition for listings but the
proposed rule change does not impose
any burden on the competition with
other exchanges; any competing
exchange could similarly adopt rules to
allow the listing of NACs.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSE–2023–09 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NYSE–2023–09. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
E:\FR\FM\04OCN1.SGM
04OCN1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSE–2023–09 and should be
submitted on or before October 25,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–22041 Filed 10–3–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98637; File No. SR–CBOE–
2023–057]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Operation
of Its Flexible Exchange Options
(‘‘FLEX Options’’) Pilot Program
Regarding Permissible Exercise
Settlement Values for FLEX Index
Options
lotter on DSK11XQN23PROD with NOTICES1
September 28, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
September 28, 2023, Cboe Exchange,
Inc. (the ‘‘Exchange’’ or ‘‘Cboe
Options’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to extend
the operation of its Flexible Exchange
Options (‘‘FLEX Options’’) pilot
program regarding permissible exercise
settlement values for FLEX Index
Options. The text of the proposed rule
change is provided below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
Rules of Cboe Exchange, Inc.
*
*
*
*
*
Rule 4.21. Series of FLEX Options
(a) No change.
(b) Terms. When submitting a FLEX Order
for a FLEX Option series to the System, the
submitting FLEX Trader must include one of
each of the following terms in the FLEX
Order (all other terms of a FLEX Option
series are the same as those that apply to
non-FLEX Options), provided that a FLEX
Index Option with an index multiplier of one
may not be the same type (put or call) and
may not have the same exercise style,
expiration date, settlement type, and exercise
price as a non-FLEX Index Option overlying
the same index listed for trading (regardless
of the index multiplier of the non-FLEX
Index Option), which terms constitute the
FLEX Option series:
(1)–(4) No change.
(5) settlement type:
(A) No change.
(B) FLEX Index Options. FLEX Index
Options are settled in U.S. dollars, and may
be:
(i) No change.
(ii) p.m.-settled (with exercise settlement
value determined by reference to the reported
level of the index derived from the reported
closing prices of the component securities),
except for a FLEX Index Option that expires
on any business day that falls on or within
two business days of a third Friday-of-themonth expiration day for a non-FLEX Option
(other than a QIX option) may only be a.m.settled; however, for a pilot period ending
the earlier of [November 6, 2023] May 6, 2024
or the date on which the pilot program is
19 17
1 15
VerDate Sep<11>2014
20:21 Oct 03, 2023
3 15
4 17
Jkt 262001
PO 00000
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
Frm 00261
Fmt 4703
Sfmt 4703
68819
approved on a permanent basis, a FLEX
Index Option with an expiration date on the
third-Friday of the month may be p.m.settled;
(iii)–(iv) No change.
*
*
*
*
*
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On January 28, 2010, the Securities
and Exchange Commission (the
‘‘Commission’’) approved a Cboe
Options rule change that, among other
things, established a pilot program
regarding permissible exercise
settlement values for FLEX Index
Options.5 The Exchange has extended
the pilot period numerous times, which
is currently set to expire on the earlier
of November 6, 2023 or the date on
which the pilot program is approved on
a permanent basis.6 The purpose of this
5 Securities Exchange Act Release No. 61439
(January 28, 2010), 75 FR 5831 (February 4, 2010)
(SR–CBOE–2009–087) (‘‘Approval Order’’). The
initial pilot period was set to expire on March 28,
2011, which date was added to the rules in 2010.
See Securities Exchange Act Release No. 61676
(March 9, 2010), 75 FR 13191 (March 18, 2010) (SR–
CBOE–2010–026).
6 See Securities Exchange Act Release Nos. 64110
(March 23, 2011), 76 FR 17463 (March 29, 2011)
(SR–CBOE–2011–024); 66701 (March 30, 2012), 77
FR 20673 (April 5, 2012) (SR–CBOE–2012–027);
68145 (November 2, 2012), 77 FR 67044 (November
8, 2012) (SR–CBOE–2012–102); 70752 (October 24,
2013), 78 FR 65023 (October 30, 2013) (SR–CBOE–
2013–099); 73460 (October 29, 2014), 79 FR 65464
(November 4, 2014) (SR–CBOE–2014–080); 77742
(April 29, 2016), 81 FR 26857 (May 4, 2016) (SR–
CBOE–2016–032); 80443 (April 12, 2017), 82 FR
18331 (April 18, 2017) (SR–CBOE–2017–032);
83175 (May 4, 2018), 83 FR 21808 (May 10, 2018)
Continued
E:\FR\FM\04OCN1.SGM
04OCN1
]]>Agencies
[Federal Register Volume 88, Number 191 (Wednesday, October 4, 2023)]
[Notices]
[Pages 68811-68819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-22041]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98665; File No. SR-NYSE-2023-09]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change To Amend the NYSE Listed
Company Manual To Adopt Listing Standards for Natural Asset Companies
September 29, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on September 27, 2023, New York Stock Exchange LLC (the
``Exchange'' or ``NYSE'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE Listed Company Manual
(``Manual'') to adopt a new listing standard for the listing of Natural
Asset Companies. The proposed rule change is available on the
Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt a new subsection of Section 102 of
the Manual (to be designated Section 102.09) to permit the listing of
common equity securities of Natural Asset Companies (or ``NACs'').
For purposes of proposed Section 102.09, a NAC is a corporation
whose primary purpose is to actively manage, maintain, restore (as
applicable), and grow the value of natural assets and their production
of ecosystem services. In addition, where doing so is consistent with
the company's primary purpose, the company will seek to conduct
sustainable revenue-generating operations. Sustainable operations are
those activities that do not cause any material adverse impact on the
condition of the natural assets under a NAC's control and that seek to
replenish the natural resources being used. The NAC may also engage in
other activities that support community well-being, provided such
activities are sustainable.
Introduction to NACs
The value of nature to life on earth is readily apparent. Healthy
ecosystems produce clean air and water, foster biodiversity, regulate
the climate, and provide the food on which our existence depends. For
purposes of this proposal, the term ``ecosystem'' refers to specific
entities (structures, functions, and components of the natural world)
that produce ecosystem services. These and other benefits derived from
ecosystems are called ecosystem services, and in aggregate, economists
estimate their value at more than US$100 trillion
[[Page 68812]]
dollars per year.\3\ Examples of ecosystem services include clean air,
water supply, flood protection, productive soils for agriculture,
climate stability, habitat for wildlife, among others.
---------------------------------------------------------------------------
\3\ Costanza et al (2014). Changes in the global value of
ecosystem services, Global Environmental Change, 26, 152-158.
Available at: https://doi.org/10.1016/j.gloenvcha.2014.04.002.
---------------------------------------------------------------------------
Despite a recognition that nature is immensely valuable, that value
generally has not been included in the financial system. Public policy
initiatives, like regulatory carbon markets, have made progress toward
reflecting the true cost of industrial activities, but most
environmental values remain uncaptured by financial reporting. Because
financial markets do not include the positive and negative
externalities related to nature's consumption and production, ecosystem
services are being degraded at alarming rates. Species extinction is
proceeding at a pace never experienced in human history.\4\ Fresh water
resources are being consumed and polluted. Agriculture is contributing
to the loss of natural habitat and soil degradation. These are
significant threats to life on earth and the economy.
---------------------------------------------------------------------------
\4\ IPBES (2019). Global assessment report on biodiversity and
ecosystem services of the Intergovernmental Science-Policy Platform
on Biodiversity and Ecosystem Services. E. S. Brondizio, J. Settele,
S. D[iacute]az, and H. T. Ngo (editors). Available at: https://doi.org/10.5281/zenodo.3831673.
---------------------------------------------------------------------------
Recognizing the urgency and opportunity presented by these
conditions, investors increasingly express a desire for investment
vehicles that will permit them to express a sustainability thesis.\5\
Improvements in corporate disclosures,\6\ introduction of climate and
nature-focused indices, and the development of ESG funds screening for
preferred or prohibited factors have all expanded the accessibility of
sustainable investing. Despite these advances, however, investors still
express an unmet need for efficient, pure-play exposure to nature and
climate.
---------------------------------------------------------------------------
\5\ Global Sustainable Investment Alliance (2020). Global
Sustainable Investment Review, 2020. Available at: https://www.gsi-alliance.org/wp-content/uploads/2021/08/GSIR-20201.pdf.
\6\ The Commission has stated that a number of its disclosure
rules may require disclosure related to climate change. Commission
Guidance Regarding Disclosure Related to Climate Change, Release No.
33-9106 (Feb. 2, 2010) 75 FR 6290 (Feb. 8, 2010). Also, the
Commission's Division of Corporation Finance recently reminded
registrants that it selectively reviews filings to monitor and
enhance compliance with applicable disclosure requirements.
Available at: https://www.sec.gov/corpfin/sample-letter-climate-change-disclosures.
---------------------------------------------------------------------------
Although there is significant demand to deploy financial capital
toward sustainability, stewards of natural landscapes have often had
little choice other than extractive development to fund their budgets
or garner a return on investment. Capital flows directed to
biodiversity conservation, renewable energy, regenerative agriculture,
and other direct investments needed to facilitate a transition to a
sustainable economy are insufficient due in part to the inability to
transparently present the economic case to access these investment
dollars based on traditional measures for financial performance. The
financing gap for biodiversity is estimated between US$598 and US$824
billion per year \7\ and for climate change is estimated at over US$5
trillion per year,\8\ and likely an order of magnitude larger for the
transition to a more sustainable, resilient, and equitable economy.\9\
---------------------------------------------------------------------------
\7\ Deutz, A., Heal, G. M., Niu, R., Swanson, E., Townshend, T.,
Zhu, L., Delmar, A., Meghji, A., Sethi, S. A., and Tobinde la
Puente, J. 2020. Financing Nature: Closing the global biodiversity
financing gap. The Paulson Institute, The Nature Conservancy, and
the Cornell Atkinson Center for Sustainability. Available at:
https://www.nature.org/en-us/what-we-do/our-insights/reports/financing-nature-biodiversity-report/.
\8\ Boehm, S., K. Lebling, K. Levin, H. Fekete, J. Jaeger, R.
Waite, A. Nilsson, J. Thwaites, R. Wilson, A. Geiges, C. Schumer, M.
Dennis, K. Ross, S. Castellanos, R. Shrestha, N. Singh, M. Weisse,
L. Lazer, L. Jeffery, L. Freehafer, E. Gray, L. Zhou, M. Gidden, and
M. Gavin. 2021. State of Climate Action 2021: Systems Transformation
Required to Limit Global Warming to 1.5 [deg]C. Washington, DC:
World Resources Institute: https://doi.org/10.46830/wrirpt.21.00048.
\9\ Force for Good (2021). Capital as a Force for Good, 2021
Report. Available at: https://www.forcegood.org/frontend/img/2021_report/pdf/Funding_the_SDGs_and_a_Sustainable_Future.pdf#toolbar=0 Chapter 2.
---------------------------------------------------------------------------
Ending the overconsumption of and underinvestment in nature
requires bringing natural assets into the financial mainstream. To that
end, the Exchange proposes to adopt listing standards to introduce a
new type of public company called a NAC, a new concept pioneered by
Intrinsic Exchange Group Inc. (``IEG''). Founded in 2017, IEG is a
private company structured as a corporation organized under the laws of
the State of Delaware that advises public sector and private landowners
on the creation of NAC structures and strategies.
NACs will be corporations that hold the rights to the ecological
performance (i.e., the value of natural assets and production of
ecosystem services) produced by natural or working areas, such as
national reserves or large-scale farmlands, and have the authority to
manage the areas for conservation, restoration, or sustainable
management. These rights can be licensed like other rights, including
``run with the land'' rights (such as mineral rights, water rights, or
air rights), and NACs are expected to license these rights from
sovereign nations or private landowners.
Under the proposed amendments to the Manual, capital raised through
an NYSE-listed NAC's initial public offering or follow-on offerings
must be used to implement the conservation, restoration, or sustainable
management plans articulated in its prospectus, fund its ongoing
operations, or otherwise fulfill its purpose to maximize ecological
performance (i.e., the value of natural assets and the production of
ecosystem services). While a core purpose of a NAC is to maximize
ecological performance, under the proposed rules, a NAC would also be
required to seek to conduct sustainable revenue-generating operations
(e.g., eco-tourism in a natural landscape or production of regenerative
food crops in a working landscape) provided that such operations are
consistent with the NAC's charter and do not cause any material adverse
impact on the condition of the natural assets under the NAC's control
and seek to replenish the natural resources being used. Therefore, all
NACs are prohibited from directly or indirectly conducting
unsustainable activities, such as mining, that lead to the degradation
of the ecosystems it is trying to protect. In conducting its revenue-
generating operations, a NAC could monetize ecosystem services that
have markets (e.g., through the sale of carbon credits). All revenues
and expenses would be reported in the financial statements of the NAC
prepared under generally accepted accounting principles (``GAAP'') and
filed with the SEC as part of the NAC's required annual report on Form
10-K, 20-F or 40-F, as applicable. In order to align the interests of
local communities with the objectives of maximizing the value of
natural assets and the production of ecosystem services, a NAC would
also be able to use its funds for activities that support local
community well-being (e.g., education, health), provided that such
activities are sustainable.
Because of the distinct purpose of a NAC (to protect and grow the
natural assets under its management), the Exchange proposes to require
NACs to publish on a periodic basis information on the ecological
performance of the natural assets licensed to a NAC. This information
will be presented in an Ecological Performance Report (an ``EPR'').
The EPR provides statistical information on the biophysical
measures (e.g., tons of carbon, acre feet
[[Page 68813]]
of water produced), condition, and economic value of each of the
ecosystem services produced by the natural assets managed by the NAC.
This will allow investors to gauge the effectiveness of management. The
information will be consistently produced and periodically reported,
following best practices from accepted valuation methodologies, as
outlined in the Reporting Framework (as defined below).
The EPR produced by a NAC must follow IEG's Ecological Performance
Reporting Framework (the ``Reporting Framework''). The Framework, in
turn, is based on the natural capital accounting standards established
in the United Nations System of Environmental-Economic Accounting--
Ecosystem Accounting Framework (``SEEA EA'').\10\ The EPR will measure,
value, and report on the ecosystem services and natural assets managed
by a NAC. Under the proposed amendments to the Manual, NACs will
conduct a Technical Ecological Performance Study (``Technical EP
Study'') annually, following the Reporting Framework. This Technical EP
Study will generate the information used to prepare and publish the
EPR. The EPR and Technical EP Study must be examined and attested to by
a public accounting firm that is registered with the Public Company
Accounting Oversight Board (``PCAOB'') and is independent from the NAC
and NAC licensor, if applicable, under the independence standard set
forth in Rule 2-01 of Regulation S-X (``Independent Reviewer'').
---------------------------------------------------------------------------
\10\ United Nations et al (2021). System of Environmental-
Economic Accounting--Ecosystem Accounting. White cover publication,
pre-edited text subject to official editing. Available at: https://seea.un.org/ecosystem-accounting.
---------------------------------------------------------------------------
In addition to the GAAP financial statements required under SEC
disclosure rules and the proposed EPR that would be derived from a
Technical EP Study, NYSE proposes to require NACs to provide a number
of unique website disclosures designed to provide transparency on the
NAC's social and environmental objectives. These include requiring NACs
to adopt and publish an Environmental and Social Policy, a Biodiversity
Policy, a Human Rights Policy, consistent with the United Nations
Guiding Principles on Business and Human Rights,\11\ and an Equitable
Benefit Sharing Policy.
---------------------------------------------------------------------------
\11\ United Nations (2011). Guiding principles on business and
human rights: Implementing the United Nations ``Protect, Respect and
Remedy'' framework. Available at: https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf.
---------------------------------------------------------------------------
Finally, the NAC will be required under applicable SEC rules to
disclose all material information about its license with a natural
asset owner (including any material amendments to the license over
time) in the registration statement filed in connection with its IPO
and in its subsequent periodic SEC filings.
Relationship Between the NYSE and IEG
The Exchange and IEG have entered into an agreement pursuant to
which IEG has granted the Exchange an exclusive license in the United
States to use the Reporting Framework in connection with the listing of
NACs on the Exchange (although the Reporting Framework will remain
proprietary to IEG). Under the terms of the agreement, the Exchange has
acquired a small minority interest in IEG and one seat on IEG's board
of directors. IEG has agreed to seek to identify and develop NACs for
listing on the Exchange, in addition to marketing the listing and
trading of NACs on the Exchange and providing training with respect to
the NAC structure and the Reporting Framework to NYSE personnel and
currently listed and potential listed NACs. IEG will be entitled to a
share of the revenues generated by the Exchange from the listing and
trading of NACs on the NYSE.
While IEG will seek to promote the listing of NACs on the NYSE, the
determination of the suitability for listing of any applicant NACs will
solely be made by the staff of NYSE Regulation and IEG will have no
role in the listing qualification process. In evaluating a NAC for
listing, the staff of NYSE Regulation intends to follow the same
procedure it utilizes in qualifying operating companies. NYSE
Regulation staff will review disclosures contained in a NAC's
registration statement and its audited financial statements to ensure
that the NAC satisfies applicable quantitative, qualitative and
corporate governance listing standards. On a continued listing basis,
NYSE Regulation staff will review a NAC's periodic reports filed with
the Commission as well as public disclosure to ensure that a NAC
continues to meet applicable listing standards.
Definitions of Key Terms Used in This Proposal, in the Context of a NAC
Unless otherwise stated, this document utilizes the definitions of
the United Nations' System of Environmental-Economic Accounting--
Ecosystem Accounting (``SEEA EA'').\12\ In addition, there are terms
unique to Natural Asset Companies, defined below:
---------------------------------------------------------------------------
\12\ United Nations et al (2021). System of Environmental-
Economic Accounting--Ecosystem Accounting (SEEA EA). White cover
publication, pre-edited text subject to official editing. Available
at: https://seea.un.org/ecosystem-accounting.
---------------------------------------------------------------------------
Community Well-being--Refers to the combination of social,
economic, environmental, cultural, and political conditions of
individuals and their communities as essential for them to flourish and
fulfil their potential.\13\
---------------------------------------------------------------------------
\13\ Wiseman, J., Brasher, K (2008) Community wellbeing in an
unwell world: trends, challenges, and possibilities. Journal of
Public Health Policy, 29: 353-366.
---------------------------------------------------------------------------
Ecological Performance--The value of natural assets and the
production of ecosystem services.
Ecological Performance Report--A report with statistical
information on the ecological performance of a NAC, including sections
with data on (i) Natural Production, (ii) Natural Assets, and (iii)
Underlying Asset Condition. The EPR is unique to NACs and will be
provided in addition to traditional financial statements.
Natural Production Section--A section of the EPR that
provides information on the annual flows of ecosystem services managed
by a NAC.
Natural Assets Section--A section of the EPR that provides
information on the net present value of natural assets producing
ecosystem services managed by a NAC.
Underlying Asset Condition Section--A section of the EPR
that provides biophysical information on the extent and condition of
the ecosystems being managed by the NAC.
Ecological Performance Rights--The rights to the value of natural
assets and the production or ecosystem services in a designated area,
including the authority to manage the area. These rights are granted to
a NAC, from a natural asset owner, as provided through a license
agreement.
Ecosystem Service Valuation--The assignation of an economic value
to an ecosystem service using one of many valuation methodologies
accepted today.
IEG Ecological Performance Reporting Framework--IEG has developed a
specific framework for NACs to derive and report on ecosystem service
values and on the quality of the natural assets being managed. In
addition, the Reporting Framework defines the components and structure
of the EPR to ensure the values are reported transparently and
consistently.
Independent Reviewer--A public accounting firm registered with the
PCAOB independent of a NAC and, where applicable, a NAC's licensor.
Local Communities--refers to groups of people--including indigenous
[[Page 68814]]
peoples and other local groups--who have direct ties to and derive
livelihood or cultural values from the area to which the NAC holds the
license.
Natural Assets--A statistical representation of ecosystems for
accounting purposes that defines them as productive units of ecosystem
services. The term ``Natural Assets'' is equivalent to SEEA EA's term
``ecosystem assets.'' Natural assets can be monetized directly or
indirectly. Like traditional assets, they have economic value and are
expected to provide future streams of benefits. In the singular form,
the term refers to an ecosystem type (e.g., a delineated forest).
Natural Asset Companies (NACs)--Corporations that hold the rights
to the ecological performance of a defined area and have the authority
to manage the areas for conservation, restoration, or sustainable
management.
Sustainable Activities--From an ecological perspective, activities
that do not cause any material adverse impact on the condition of
ecosystems, and that seek to replenish the natural resources being
used.
Unsustainable Activities--From an ecological perspective,
activities that cause material adverse impact on the condition of
ecosystems, and extract resources without replenishing them.
The IEG Reporting Framework
IEG has developed a Reporting Framework for NACs to measure and
value natural assets and define how the EPR should be structured to
ensure transparency, robustness, and consistency in the reporting of
values and other statistical information disclosed.
The Reporting Framework to be used by NACs is based on the
standards developed in SEEA EA. SEEA EA provides the most comprehensive
guidance on natural capital accounting and is of particular relevance
to the valuation of NACs due to its spatial approach and its focus on
measuring and reporting on the ecosystem services produced by
ecosystems.
IEG adopted SEEA EA as the accounting standard for the measurement
and valuation of natural assets and ecosystem services, with some minor
adaptations to ensure that the natural asset valuations of NACs provide
comprehensive, understandable, consistent, robust, and transparent
information to investors and other users of the companies EPR. The
Reporting Framework includes specifications on how to apply SEEA EA to
report on the annual performance of NACs. In particular, the Reporting
Framework sets up NACs to report the Total Economic Value (``TEV'') of
natural assets, which is in line with the recommendations of the
British Standard for natural capital accounting (BS 8632) for financial
organizations and the ISO Standard 14008.
Given that NACs are designed to manage and grow the value of
natural assets and the production of ecosystem services--a NAC's
activities are not well captured solely by traditional financial
reporting standards like GAAP/IFRS, as most ecosystem services are not
monetized today. To account for and capture the value of the non-
monetized ecosystem services, NACs will be required to conduct an
annual Technical EP Study, adhering to IEG's Reporting Framework, in
order to prepare their EPR. The Reporting Framework defines:
the steps to characterize, measure and value the ecosystem
service and natural asset values in a Technical EP Study, and
the components and structure of the EPR including guidance
to compile its sections, to ensure transparency, robustness, and
consistency in the reporting of information about the natural assets.
The Reporting Framework (which provides instructions for the
preparation of the EPR) will be publicly accessible on nyse.com.\14\
---------------------------------------------------------------------------
\14\ The text of the Framework is included [sic] in Exhibit 3 to
this filing.
---------------------------------------------------------------------------
The Exchange, in consultation with IEG, will have sole authority to
determine whether and how to propose amendments to the Reporting
Framework from time to time. Any proposed change to the Reporting
Framework will have the effect of a change to an Exchange rule and will
therefore be filed by the Exchange with the Commission pursuant to
Section 19(b) of the Act. Additionally, the Exchange will maintain on
nyse.com a publicly-accessible copy of of the Reporting Framework.
Proposed Listing Rules
Required Corporate Documents
1. Charter
Each NAC must file its charter as an exhibit to its registration
statement. As a condition to initial listing, the NYSE proposes to
require a NAC's charter to state the following:
1. The purpose of the company is to actively manage, maintain,
restore (as applicable), and grow the value of natural assets and their
production of ecosystem services. In addition, where doing so is
consistent with the company's primary purpose, the company will seek to
conduct sustainable revenue-generating operations. Sustainable
operations are those activities that do not cause any material adverse
impact on the condition of the natural assets under its control, and
that seek to replenish the natural resources being used. The
sustainability of the revenue-generating operations will be determined
based on the impacts of their activities on the condition metrics, and
where applicable, on any capacity-to-produce indicators reported by a
NAC in its EPR. Condition metrics should not show degradation as a
result of these activities and capacity-to-produce indicators should be
moving to a rate where resource extraction is less than resource
replenishment. The NAC may also engage in other activities that support
community well-being, provided such activities are sustainable.
2. NAC funds (including any proceeds from the sale of the company's
securities at any time) must be used primarily to meet the NAC's
operational needs to fulfill its purpose. In addition, funds may be
used to support community well-being, provided such activities are
sustainable.
3. The NAC will be prohibited from engaging directly or indirectly
in unsustainable activities. These are defined as activities that cause
any material adverse impact on the condition of the natural assets
under its control, and that extract resources without replenishing them
(including, but not limited to, traditional fossil fuel development,
mining, unsustainable logging, or perpetuating industrial agriculture).
The NAC will be prohibited from using its funds to finance such
unsustainable activities.
If any of the foregoing provisions of the NAC's charter are
eliminated or materially amended in a manner that is inconsistent with
their required form at any time, the NAC will be subject to delisting
from the NYSE.
2. License Agreements
NACs will acquire the ecological performance rights of a designated
area by entering into an agreement with the natural asset owner (e.g.,
a governmental entity or private landowner) to obtain a license with
respect to such rights.\15\ The Exchange proposes that all material
terms of the
[[Page 68815]]
applicable license agreement be publicly disclosed in the NAC's
periodic filings consistent with SEC rules. At minimum, the NAC will be
required to disclose the following information about any license
agreement:
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\15\ The Exchange notes that it will be important for NACs in
their offering materials and subsequent public disclosure documents
to be clear in distinguishing the rights to the land ownership and
geographic area from the rights to the ecological performance and to
clearly specify, where appropriate, the limits of the NAC's rights
as an owner or licensee.
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a. Term: At the time of initial listing, the term of any license
agreement must be a minimum of ten years from the date of closing of
the NAC's initial public offering (the Exchange expects that most
license agreements will have terms significantly longer than ten years
and, in some cases, may be perpetual);
b. Scope: The specific natural assets and ecosystem services
covered by the license agreement;
c. License Payments: The amount and terms of any ongoing payments
due from the licensee to the licensor;
d. Modification Provisions: The circumstances under which a license
agreement may be modified and the procedures for effecting any such
modification;
e. Termination Provisions: The circumstances under which a license
agreement may be terminated, including the rights and obligations of
all parties to the license agreement, and the procedures for effecting
any such termination.
The proposed rule would specify that any NAC whose license is
terminated or materially breached by either party would be subject to
delisting.
3. NAC Policies
Proposed Section 102.09 of the Manual provides that a NAC seeking
to list on the NYSE must adopt the following written polices
(collectively, the ``NAC Policies'') and post them on its website by
the earlier of the date that the NAC's initial public offering closes
or five business days following the NAC's initial listing date:
1. An Environmental and Social Policy that articulates the
objectives and principles that will guide the NAC to achieve sound
environmental and social performance. Such policy must include
requirements to conduct a process of environmental and social
assessment, and establish, as soon as practicable after listing, an
Environmental and Social Management System (``ESMS'').\16\ The ESMS
should be designed to:
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\16\ The ESMS should be consistent with generally accepted
international standards, such as the ``IFC Performance Standard 1:
Assessment and Management of Environmental and Social Risks and
Impacts.''
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(i) Identify and assess environmental and social risks and impacts,
(ii) Identify measures to avoid, minimize and mitigate the negative
risks and impacts, and
(iii) Promote improved environmental and social performance.
2. A Biodiversity Policy that articulates a commitment to achieving
no net loss, and where possible a net positive impact on biodiversity.
The Biodiversity Policy should be based on the mitigation hierarchy, a
planning and management approach for addressing impacts to biodiversity
and ecosystem services through avoidance, minimization, restoration,
and offsetting.
3. A Human Rights Policy that articulates a commitment to human
rights, consistent with the United Nations Guiding Principles on
Business and Human Rights,\17\ including a commitment to recognize and
respect people's rights in accordance with customary, national, and
international human rights laws, in particular those of indigenous
peoples.
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\17\ United Nations (2011). Guiding Principles on Business and
Human Rights: Implementing the United Nations ``Protect, Respect and
Remedy'' Framework. Available at: https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf.
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4. An Equitable Benefit Sharing Policy that articulates the NAC's
commitment for sharing benefits with local communities. A NAC must
include in its license agreement with the licensor a provision
requiring the licensor to comply with the applicable terms of the
Equitable Benefit Sharing Policy.
The Equitable Benefit Sharing Policy must require an equitable
benefit sharing arrangement for the distribution of shares of the NAC's
common stock to local communities (i.e., those who have direct ties to
and derive livelihood or cultural values from the applicable area). The
NAC's common stock distribution must be completed no later than the
time of closing of the NAC's IPO and must meet the following
requirements at a minimum:
If the NAC has entered into a license agreement with
respect to public lands, shares representing at least 50% of the shares
of the NAC's outstanding shares as of the closing of the IPO must be
distributed to local communities.
If the NAC has entered into a license agreement with
respect to private lands, shares representing at least 5% of the shares
of the NAC outstanding as of the closing of the IPO must be distributed
to local communities.
The foregoing distributions of shares of common stock may be placed
in a trust or equivalent structure, for the benefit of the intended
beneficiaries. Any trust (or equivalent) holding shares of the NAC for
this purpose must be under the majority control of trustees that are
fully independent of both the NAC and, where applicable, the licensor,
and/or be representative of the intended beneficiaries.
The Equitable Benefit Sharing Policy must provide that the NAC will
(a) deposit its cash and other financial assets in accounts with a bank
custodian regulated by the U.S. Office of the Comptroller of the
Currency (an ``Authorized Bank''); and (b) include in its license
agreement a provision requiring the licensor to place any shares of the
NAC it owns in the custody of an Authorized Bank and deposit the
proceeds from any NAC share sales by the licensor and any distributions
received from the NAC in accounts with an Authorized Bank, pending the
distribution of such assets in a manner consistent with the NAC's
Equitable Benefit Sharing Policy.
The NAC must review the adequacy of the Equitable Benefit Sharing
Policy at least annually and publish on its website a detailed
description of its activities in accordance with such policy (the
``Annual EBS Report'') no later than 90 days after the end of each
fiscal year.
The Annual EBS Report must be examined by an Independent Reviewer
(the ``EBS Independent Reviewer'') and be accompanied by an examination
level report (i.e., reasonable assurance) regarding the NAC and, if
applicable, the licensor, in accordance with the Equitable Benefits
Sharing Policy during the applicable fiscal period, including a review
of the accounts maintained by the NAC and the licensor at Authorized
Banks, in accordance with the PCAOB or AICPA's attestation standards.
The NAC's accordance with the requirements of its Equitable
Benefits Sharing Policy must be reviewed periodically either by (i) a
committee consisting solely of directors who meet the independence
requirements of Section 303A of the Manual or (ii) the NAC's
independent directors acting as a group. Such committee or the
independent directors, as the case may be, must meet for this purpose
at least annually and such meeting must include an executive session in
which management does not participate and a discussion with the EBS
Independent Reviewer at which management must not be present.
4. Ecological Performance Report
Proposed Section 102.09 will provide that, prior to its initial
listing, the NAC must make publicly available an EPR that has been
prepared consistent with the Reporting Framework. The Reporting
Framework (including instructions for the preparation of the
[[Page 68816]]
EPR and templates for the EPR) will be posted on nyse.com and is
attached hereto [sic] as Exhibit 3. NACs will conduct a Technical EP
Study annually, following the Reporting Framework, which will generate
the information used to prepare and publish the EPR. Both the Technical
EP Study and EPR must be examined by an Independent Reviewer annually.
The EPR must be accompanied by an examination level report (i.e.,
reasonable assurance) prepared by such Independent Reviewer in
accordance with the PCAOB or AICPA's attestation standards.
Quantitative and Corporate Governance Listing Rules
To qualify for listing as a NAC, an applicant issuer would be
required to meet the quantitative listing requirements applicable to
the listing of common equities of operating companies as set forth in
Sections 102.01(A), (B), and (C) of the Manual. Proposed Section
102.09(G) would provide that listed NACs would be subject to all of the
continued listing requirements that are applicable to operating
companies listed under Sections 102 and 103 of the Manual.
Audit Committee
As described above, a listed NAC would be subject to all of the
corporate governance requirements set forth in Section 303A.00,
including the requirement of Section 303A.06 that a company must have
an independent audit committee and the provisions of Section 303A.07
setting forth additional requirements for the audit committee. The
Exchange proposes to amend Section 303A.07 to establish additional
responsibilities specific to the audit committee of a NAC. As proposed,
Section 303A.07 would require that (in addition to the requirements of
Section 303A.07(b)), the NAC's audit committee charter must address the
following:
1. That the audit committee's purpose includes assisting board
oversight of (1) the integrity of the NAC's EPR, (2) the qualifications
and independence of the Independent Reviewer and (3) the performance of
the Independent Reviewer.
2. The audit committee of the NAC must:
(i) at least annually, obtain and review a report by the
Independent Reviewer describing: the Independent Reviewer's internal
quality-control procedures; any material issues raised by the most
recent internal quality-control review, or peer review, of the
Independent Reviewer, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by the
Independent Reviewer, and any steps taken to deal with any such issues;
and (to assess the Independent Reviewer's independence) all
relationships between the Independent Reviewer and the NAC. After
reviewing the foregoing report and the Independent Reviewer's work
throughout the year, the audit committee will be in a position to
evaluate the Independent Reviewer's qualifications, performance, and
independence. This evaluation should include the review and evaluation
of the lead partner of the Independent Reviewer. In making its
evaluation, the audit committee should take into account the opinions
of management and the NAC's internal auditors (or other personnel
responsible for the internal audit function). In addition to assuring
the regular rotation of the lead partner responsible for the EPR
Review, the audit committee should further consider whether, in order
to assure continuing independence of the Independent Reviewer, there
should be regular rotation of the firm undertaking the EPR Review
itself. The audit committee should present its conclusions with respect
to the Independent Reviewer to the full board and meet to review and
discuss the NAC's annual EPR. Meetings may be telephonic if permitted
under applicable corporate law; polling of audit committee members,
however, is not permitted in lieu of meetings.
(ii) meet separately, periodically, with management and the
Independent Reviewer to discuss the EPR and the conduct of the EPR
Review. To perform its oversight functions most effectively, the audit
committee must have the benefit of separate sessions with management
and the Independent Reviewer. These separate sessions may be more
productive than joint sessions in surfacing issues warranting committee
attention.
(iii) review with the Independent Reviewer any problems in the
conduct of their review or difficulties and management's response. The
audit committee must regularly review with the Independent Reviewer any
difficulties the Independent Reviewer encountered in the course of its
review, including any restrictions on the scope of the Independent
Reviewer's activities or on access to requested information, and any
significant disagreements with management.
(iv) set clear hiring policies for employees or former employees of
the Independent Reviewer. Employees or former employees of the
Independent Reviewer may be valuable additions to the NAC's management.
Such individuals' familiarity with the business, and personal rapport
with the employees, may be attractive qualities when filling a key
opening. However, the audit committee should set hiring policies taking
into account the pressures that may exist for personnel of the
Independent Reviewer consciously or subconsciously seeking a job with
the NAC they review.
(v) report regularly to the board of directors with respect to the
preparation of the EPR and the performance of the Independent Reviewer.
The audit committee should review with the full board any issues that
arise with respect to the quality or integrity of the EPR or the
performance and independence of the Independent Reviewer.
Material News
A NAC will be required to immediately disclose, pursuant to the
Exchange's immediate release policy set forth in Sections 202.05 and
202.06 of the Manual, any event (e.g., a forest fire) that is
anticipated to have a material adverse effect with respect to any of
the criteria included in the EPR. As soon thereafter as possible, the
NAC must disclose in a Form 8-K or Form 6-K, as applicable, its
estimates of the changes to the previously presented EPR of such event.
Periodic Publication of EPR and Occurrence of a Late EPR Delinquency
Each year after initial listing, a NAC must publish on its public
website an EPR that has been prepared consistent with the Reporting
Framework. The Technical EP Study and EPR must be examined by the
Independent Reviewer. The EPR must be accompanied by an examination
level report prepared by such Independent Reviewer in accordance with
the PCAOB or AICPA's attestation standards. The EPR must cover the same
fiscal periods as the audited financial statements included in the
NAC's annual report on Form 10-K, Form 20-F, or Form 40-F, as
applicable. The NAC should utilize its best efforts to publish its
annual EPR no later than the filing of its annual report on Form 10-K,
Form 20-F, or Form 40-F, as applicable. In the event that the annual
EPR is not completed by the filing due date of the NAC's annual report
on Form 10-K, Form 20-F, or Form 40-F, as applicable, such annual EPR
is required to be published no later than 180 days after the end of the
fiscal year to which such annual EPR relates (the ``NAC EPR Due Date''
and the failure of a listed NAC to timely publish its annual EPR, a
``NAC Late EPR Delinquency''). In the event that the
[[Page 68817]]
company is unable to file its Form 10-K, Form 20-F, or Form 40-F, as
applicable, by the NAC EPR Due Date, the company should not delay the
publication of its EPR, but rather should publish its EPR on or before
that date.
Upon the occurrence of a NAC Late EPR Delinquency, the Exchange
will promptly send written notification (the ``NAC Late EPR Delinquency
Notification'') to an affected NAC of the procedures set forth below.
Within five days of the date of the NAC Late EPR Delinquency
Notification, the company will be required to (a) contact the Exchange
to discuss the status of the delinquent annual EPR (the ``Delinquent
NAC EPR'') and (b) issue a press release disclosing the occurrence of
the NAC Late EPR Delinquency, the reason for the NAC Late EPR
Delinquency, and, if known, the anticipated date such NAC Late EPR
Delinquency will be cured via the publication of the Delinquent NAC
EPR. If the company has not issued the required press release within
five days of the date of the NAC Late EPR Delinquency Notification, the
Exchange will issue a press release stating that the company has
incurred a NAC Late EPR Delinquency and providing a description
thereof.
NAC Non-Reliance Event
In the event that a NAC concludes that its previously issued EPR
should no longer be relied upon because of an error in such EPR (a
``NAC Non-Reliance Event,'' and the disclosure of such NAC Non-Reliance
Event, a ``NAC Non-Reliance Disclosure''), it will be required to
comply with the NAC Late EPR Delinquency Notification procedures set
forth above. If the NAC does not publish an amended EPR within 60 days
of the issuance of the NAC Non-Reliance Disclosure (an ``Extended NAC
Non-Reliance Disclosure Event'' and, together with a NAC Late EPR
Delinquency, a ``NAC Reporting Delinquency'') for purposes of the cure
periods described below a NAC Reporting Delinquency will be deemed to
have occurred on the date of original issuance of the NAC Non-Reliance
Disclosure. If the Exchange believes that a NAC is unlikely to publish
the amended EPR within 60 days after a NAC Non-Reliance Disclosure or
that the errors giving rise to such NAC Non-Reliance Disclosure are
particularly severe in nature, the Exchange may, in its sole
discretion, determine earlier than 60 days that the applicable NAC has
incurred a NAC Publication Delinquency as a result of such NAC Non-
Reliance Disclosure.
Cure Periods for NAC Publication Delinquencies
During the six-month period from the date of the NAC Publication
Delinquency (the ``Initial NAC EPR Cure Period''), the Exchange will
monitor the company and the status of the Delinquent NAC EPR, including
through contact with the company, until the NAC Publication Delinquency
is cured. If the company fails to cure the NAC Publication Delinquency
within the Initial NAC EPR Cure Period, the Exchange may, in the
Exchange's sole discretion, allow the company's securities to be traded
for up to an additional six-month period (the ``Additional NAC EPR Cure
Period'') depending on the company's specific circumstances. If the
Exchange determines that an Additional NAC EPR Cure Period is not
appropriate, suspension and delisting procedures will commence in
accordance with the procedures set out in Section 804.00 of the Listed
Company Manual. A NAC will not be eligible to follow the procedures
outlined in Sections 802.02 and 802.03 with respect to these criteria.
In determining whether an Additional NAC EPR Cure Period after the
expiration of the Initial NAC EPR Cure Period is appropriate, the
Exchange will consider the likelihood that the Delinquent NAC EPR can
be published during the Additional NAC EPR Cure Period. The Exchange
strongly encourages companies to provide ongoing disclosure on the
status of the Delinquent NAC EPR to the market through press releases
and will also take the frequency and detail of such information into
account in determining whether an Additional NAC EPR Cure Period is
appropriate. If the Exchange determines that an Additional NAC EPR Cure
Period is appropriate, and the company fails to publish the Delinquent
NAC EPR by the end of such Additional NAC EPR Cure Period, suspension
and delisting procedures will commence immediately in accordance with
the procedures set out in Section 804.00. In no event will the Exchange
continue to trade a NAC's securities if that company has failed to cure
its NAC EPR Delinquency on the date that is twelve months after the
applicable NAC EPR Due Date.
Filing Delinquencies and NAC EPR Delinquencies Are Treated Separately
For purposes of Section 802.01E, NACs will also be subject to the
provisions with respect to delinquencies in filing periodic reports as
set forth in that rule (a ``Filing Delinquency''). A Filing Delinquency
is a separate event of noncompliance from a NAC Publication
Delinquency. Consequently, a NAC can be deemed to have cured a Filing
Delinquency while remaining noncompliant due to an ongoing NAC
Publication Delinquency or vice versa.
Components and Form of the Statements
The EPR published by NYSE-listed NACs will consists of three
components: (1) Natural Production Section, (2) Natural Assets Section
and (3) Underlying Asset Condition Section.
The process for conducting a Technical EP Study and the
requirements for preparing an EPR are contained in the Reporting
Framework which is attached hereto [sic] as Exhibit 3. NACs must
conduct a Technical EP Study and prepare and publish an EPR that
complies with the Reporting Framework, in each case on an annual basis.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b)(5) of the Act,\18\ in that it is designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest, and is not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\18\ 15 U.S.C. 78f(b)(5).
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The proposed listing standard for NACs is consistent with the
protection of investors and the public interest because, among other
things, it includes rigorous quantitative financial requirements and
corporate governance requirements. Specifically, the proposed listing
standard requires NACs to meet the same quantitative initial and
continued listing standards as are applied to operating companies
listed on the NYSE. In addition, NACs would be subject, without
exception, to all of the other rules applicable to NYSE listed
operating companies.
The proposed rule change is designed to perfect the mechanism of a
free and open market in that it will facilitate the listing and trading
of an additional type of security and will therefore enhance
competition among market participants, to the benefit of investors and
the marketplace. There is significant and growing interest in investing
in asset
[[Page 68818]]
classes that are consistent with the objective of protecting and
improving the environment. The Exchange believes that the listing of
NACs will provide investors with an investment vehicle that meets this
demand. The Exchange also believes that the development of NACs will
provide a source of funding to maintain and restore natural assets.
The charter provisions each NAC would be required to adopt under
the proposed rule are also consistent with the protection of investors
and the public interest because they are designed to ensure that the
NAC conducts its operations in a manner consistent with the ecological
and socially equitable goals that would motivate investors when
investing in the NAC. Specifically, these proposed charter requirements
would include the following provisions:
The purpose of the company is to actively manage,
maintain, restore (as applicable), and grow the value of natural assets
and their production of ecosystem services. In addition, where doing so
is consistent with the company's primary purpose, the company will seek
to conduct sustainable revenue-generating operations. Sustainable
operations are those activities that do not cause any material adverse
impact on the condition of the natural assets under its control, and
that seek to replenish the natural resources being used. The
sustainability of the revenue-generating operations will be determined
based on the impacts of their activities on the condition metrics, and
where applicable, on any capacity-to-produce indicators reported by a
NAC in its EPR. Condition metrics should not show degradation as a
result of these activities and capacity-to-produce indicators should be
moving to a rate where resource extraction is less than resource
replenishment. The NAC may also engage in other activities that support
community well-being, provided such activities are sustainable.
NAC funds (including any proceeds from the sale of the
company's securities at any time) must be used primarily to meet the
NAC's operational needs to fulfill its purpose. In addition, funds may
be used to support community well-being, provided such activities are
sustainable.
The NAC will be prohibited from engaging directly or
indirectly in unsustainable activities. These are defined as activities
that cause any material adverse impact on the condition of the natural
assets under its control, and that extract resources without
replenishing them (including, but not limited to, traditional fossil
fuel development, mining, unsustainable logging, or perpetuating
industrial agriculture). The NAC will be prohibited from using its
funds to finance such unsustainable activities.
If any of the foregoing provisions of the NAC's charter are
eliminated or materially amended in a manner that is inconsistent with
their required form at any time, the NAC will be subject to delisting
from the NYSE.
Similarly, the various policies that the NAC would be required to
adopt and publicize (including an Environmental and Social Policy, a
Biodiversity Policy, a Human Rights Policy, and an Equitable Benefits
Sharing Policy) would protect investors by establishing clear standards
that the NAC must abide by in seeking to address its stated ecological
and social goals.
In addition, the Exchange believes that the examination conducted
by the Independent Reviewer with respect to the initial and periodic
EPR published by each NAC are consistent with investor protection and
the public interest because they are designed to ensure that such EPR
is prepared in a manner that is consistent with the requirements of the
Reporting Framework. Further, this thorough independent expert
examination of each NAC's EPR will protect investors by providing
significant assurance as to the reliability of that EPR. The proposal
would also amend Section 802.01E of the Manual to create non-compliance
and delisting procedures for NACs that fail to timely publish their
EPR. The proposed requirements for the audit committee of the NAC to
oversee the preparation of the EPR and the performance of the
Independent Reviewer are consistent with the protection of investors as
they will help assure the accuracy and completeness of the EPR and the
quality of the Independent Reviewer's review.
Similarly, as is the case with all listed companies, NACs would be
required to immediately disclose pursuant to the Exchange's immediate
release policy set forth in Sections 202.05 and 202.06 of the Manual
any material event, including any event that is anticipated to have a
material adverse effect with respect to any of the criteria included in
the EPR (e.g., a forest fire). It is therefore in the interests of
investors to have a rigorous rule to address delinquencies with respect
to disclosures and to require immediate disclosure of material events.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. A listing under the proposed
rule would be available in a non-discriminatory way to any company
satisfying its requirements, as well as all other applicable NYSE
listing requirements. In addition, the Exchange faces competition for
listings but the proposed rule change does not impose any burden on the
competition with other exchanges; any competing exchange could
similarly adopt rules to allow the listing of NACs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NYSE-2023-09 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSE-2023-09. This
file number should be included on the subject line if email is used. To
help the Commission process and review your
[[Page 68819]]
comments more efficiently, please use only one method. The Commission
will post all comments on the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for website viewing and printing in the Commission's Public
Reference Room, 100 F Street NE, Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the Exchange. Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to file number
SR-NYSE-2023-09 and should be submitted on or before October 25, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-22041 Filed 10-3-23; 8:45 am]
BILLING CODE 8011-01-P
