Federal Register, Volume 88 Issue 191 (Wednesday, October 4, 2023)

[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]

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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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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.
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\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.
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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.
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\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.
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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.
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\5\ Global Sustainable Investment Alliance (2020). Global
Sustainable Investment Review, 2020. Available at: http://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.
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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\
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\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.
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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'').
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\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.
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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.
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\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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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:
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\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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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\
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\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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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\
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\14\ The text of the Framework is included [sic] in Exhibit 3 to
this filing.
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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