Capital markets regulator Sebi will soon finalise its guidelines for listing of Green Bonds, which would facilitate raising of funds for investment in renewable energy space, after incorporating comments from the Ministry of New and Renewable Energy.
Capital markets regulator Sebi will soon finalise its guidelines for listing of Green Bonds, which would facilitate raising of funds for investment in renewable energy space, after incorporating comments from the Ministry of New and Renewable Energy (MNRE). Over a year ago, Sebi’s board had approved detailed draft norms for issuance and listing of Green Bonds in the stock market to help meet the huge financing requirements worth USD 2.5 trillion for climate change actions in India by 2030. However, the final guidelines are hanging in balance since then for want of certain inputs from the government side, a senior official said. Green bonds can be key to help meet an ambitious target India has of building 175 gigawatt of renewable energy capacity by 2022, which will require a massive estimated funding of USD 200 billion. “Sebi had sent a draft of the proposed guidelines to Ministry of Finance for their comments. After discussion with concerned departments, the Finance Ministry had forwarded comments of the Ministry of Environment, Forest and Climate Change to the markets regulator. “However, Sebi was informed that the MNRE’s comments were still awaited and would be forwarded to the markets regulator immediately upon receipt of the same,” the official said.
Subsequently, Sebi also sent reminders to MNRE for their comments on the matter, he said, while adding that there now appears to be some progress on this front and the regulator would finalise the guidelines for green bonds soon. The new norms would also help the investors take informed investment decisions and bring in uniformity in the disclosure requirements, Sebi had said in a statement in January last year after its board approved the proposal in this regard. Financing needs of renewable energy space in the country requires new channels to be explored, which can also help in reducing the cost of the capital.
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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.
A green bond is like any other bond where a debt instrument is issued by an entity for raising funds from investors. However, what differentiates a green bond from other bonds is that the proceeds of a Green Bond offering are ‘ear-marked’ for use towards financing green projects. As of now, there are no standard norms for green bonds. 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.