Market Regulator SEBI Finalizes Norms for Issuance and Listing of Green Bonds

SEBI had proposed a new framework for issuance and listing of green bonds more than a year ago, and this will help in raising funds from capital markets for investment in the renewable energy space.

Regulator SEBI has finalized norms for issuance and listing of green bonds, which will help in raising funds from capital markets for investment in the renewable energy space.

The rules have been finalized by the Securities and Exchange Board of India (SEBI) after taking into account inputs from the finance and environment ministries, as also from the Ministry of New and Renewable Energy (MNRE), a top official said.

The final guidelines would be made public soon, he added.

While SEBI had proposed a new framework for issuance and listing of green bonds more than a year ago, the final rules were hanging in balance as the regulator was awaiting response from various ministries and departments on proposed norms.

The regulator has now received comments from the Ministry of New and Renewable Energy (MNRE), while the inputs from the Ministry of Environment, Forest and Climate Change were received earlier, the official added.

A green bond is like any other debt instrument issued by an entity for raising funds from investors. However, what differentiates it from other bonds is that the proceeds are ear-marked for use towards financing green projects.

As of now, there are no standard norms for green bonds.

SEBI’s board had considered and approval a proposal for issuance and listing of green bonds way back in January 2016 to help meet the huge financing requirements worth USD 2.5 trillion for climate change actions in India by 2030.

Subsequently, the regulator had sent a copy of draft circular in this regard to the Ministry of Finance for inputs from the concerned government departments.

Green bonds can be key to help meet an ambitious target India has of building 175GW of renewable energy capacity by 2022, which will require a massive estimated funding of USD 200 billion.

The new norms would also help the investors take informed investment decisions and bring in uniformity in the disclosure requirements, SEBI had said after its board approved the proposal last year.

Financing needs of renewable energy space in the country require new channels to be explored, which can also help in reducing the cost of the capital.

SEBI had decided on the new norms after taking into account public comments to a draft paper issued by the regulator in this regard in December 2015.

Issuance and listing of green bonds will be governed by the SEBI regulations for debt securities but the issuer of green bonds will have to make incremental disclosures.

These norms would also provide for requirement of independent third party reviewer, certifier or validator for reviewing, certifying and validating the pre-issuance and post-issuance process, including project evaluation and selection criteria. However, this has been kept optional.

The issuer will have to provide the details of systems and procedures to be employed for tracking the proceeds, the investments made and earmarked for eligible projects. The same would need to be verified by external auditors.

According to SEBI, green bonds can help enhance an issuer’s reputation and attract a wider investor base, while benefiting the issuers in terms of better pricing of their bonds compared to a regular bond.

PTI