Sebi proposes a concept of blue bonds for sustainable financing activities

New Delhi, Aug 08 (PTI) Market regulator Sebi has proposed the concept of blue bonds as a mode of sustainable financing, saying that these securities can be used for various activities related to the blue economy, including resource exploitation oceans and sustainable fishing.

Additionally, the watchdog has suggested strengthening the green bond framework by amplifying the definition of green debt securities and improving disclosures, according to a consultation paper.

The proposals aim to align with the updated Green Bond Principles (GBP) published by the International Capital Market Association (ICMA).

Since the framework of green debt securities was defined by the Securities and Exchange Board of India (Sebi), many events have occurred in the field of sustainable finance in the world, thus requiring examination in the Indian context, in accordance with the consultation document. released Thursday.

“India has enormous potential for the deployment of Blue Bonds in various aspects of the Blue Economy” such as ocean resource mining, sustainable fisheries, national offshore wind energy policy and in the area of blue flag beach ecotourism model that provides tourists with a clean and hygienic environment. bathing water facilities, he said.

According to the World Bank, the blue economy is “the sustainable use of ocean resources for economic growth, improved livelihoods and jobs while maintaining the health of the ocean ecosystem”.

India has a coastline of 7,500 kilometers and 14,500 kilometers of inland waterways, and the development of the blue economy can act as a catalyst for growth.

Currently, the blue economy accounts for 4.1% of India’s economy, Sebi said.

In addition, the regulator suggested adding two categories – pollution prevention and control and products suitable for the circular economy – as eligible green projects.

The Sebi Framework defines Green Debt Securities (GDS) as debt securities issued to raise funds to be used for projects or assets falling under certain categories.

The regulator suggested that the issuer inform investors of the types of temporary placement envisaged for the balance of the unallocated net proceeds. In addition, the use of proceeds from each issue of GDS made by an issuer must be tracked and disclosed separately.

In addition, the issuer must disclose any taxonomies, green standards or certifications, if referenced in the project selection.

According to the Sebi, issuers must disclose information relating to the reporting of the environmental impact of projects financed by green debt securities. This will allow investors to gather information related to the project’s impact on the environment, he added.

To strengthen disclosure requirements for refinancing projects through GDS, Sebi said that in the event that all or part of the proceeds were to be used for refinancing, then issuers should provide an estimate of the financing and refinancing share. .

In addition, they should specify which project portfolios can be refinanced and the expected look-back period for refinanced eligible green projects.

Indian companies raised almost $7 billion through ESG (environmental, social and governance) bonds and green bonds in 2021, compared to $1.4 billion in 2020 and $4 billion in 2019.

Most green bonds issued by Indian issuers are listed on offshore exchanges, as issuers find it more attractive to list on exchanges outside the Sebi framework.

The regulator noted that one of the main obstacles to further growth has been a consistent and robust approach to identifying what is considered “green”. A lack of clarity in this regard leads to greenwashing which is defined as the practice of channeling green bond proceeds into projects or activities with negligible or negative environmental benefits, he added.

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