Sebi Clears New Issuance, Listing Norms for Green Bonds

Mumbai: To help companies raise funds through green bonds for investment in renewable energy space, regulator Sebi on Monday approved new norms for issuance and listing of such securities in the stock market.

The move is aimed at helping meet the huge financing requirements worth $2.5 trillion for climate change actions in India by 2030.

The new norms, which were approved by Sebi's board at a meeting here on Monday, would also help the investors take informed investment decisions and bring in uniformity in the disclosure requirements, the regulator said in a statement.

Sebi said the 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.

The new norms have been finalised after taking into account public comments to a draft paper issued by Sebi in this regard last month. A decision to start the consultation process was taken in Sebi's last board meeting on November 30, 2015.

The regulator said the issuance and listing of green bonds will be governed by the Sebi regulations for debt securities but the issuer of green bonds would have to make incremental disclosures. The definition of green bonds would be specified by Sebi from time to time.

The new norms 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.

Sebi also said that an escrow account would not be mandatory for issuance of such bonds, but issuer will have to provide the details of the systems and procedures to be employed for tracking the proceeds of the issue, including the investments made and earmarked for eligible projects. The same would need to be verified by the external auditors.

Issuer would have to make disclosures including use of proceeds, list of projects to which Green Bond proceeds have been allocated in the annual report and periodical filings made to the stock exchanges.

The draft paper had earlier proposed that the proceeds of Green Bonds be credited to an escrow account and will be utilised only for the stated purpose, as in the offer document.

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 were no standard norms for green bonds.