Markets regulator Sebi has proposed to expand the sustainable finance framework in the securities market by introducing a new category of financial instruments.
This category will include social bonds, sustainable bonds and sustainability-linked bonds, in addition to the current green debt securities. It aims to provide issuers with flexibility to raise funds for projects that align with environmental, social and governance (ESG) objectives.
In a consultation paper released on Friday, Sebi proposed that issuers, in addition to existing green debt securities, be allowed to raise funds by issuing social bonds, sustainable bonds and sustainability-linked bonds. These bonds will be collectively known as ESG debt securities.
This will enable issuers to raise money for more sustainable projects, helping to close the funding gap for the Sustainable Development Goals.
Sebi said it has received representations from market participants, including the Confederation of Indian Industry, to expand the scope of regulatory framework related to sustainable finance to include Social Bonds, in addition to existing Green Debt Securities as a mode of raising sustainable funds, in line with global practices.
According to the consultation paper, Sebi said it “proposed to introduce the concept of Sustainable Securitised Debt Instruments with the purpose of providing originators of underlying credit facilities that are within such international or national frameworks for sustainable finance, and thereby providing investors also with an opportunity to participate in the sustainable securitised debt instruments.”
The consultation paper also addressed initial and ongoing disclosure of sustainable securitised debt instruments that would be based on international frameworks.
Initial disclosures may be made in the securities offering document, while ongoing disclosures may be included in annual reports or other required forms.
The market watchdog also suggested that issuers of ESG debt securities and sustainable securitized debt instruments appoint an independent external auditor or certifier, to facilitate transparency and credibility.
The review could take several forms, including second-party opinions, verification, certification, or scoring/rating.
The Securities and Exchange Board of India (Sebi) has invited public comments and suggestions on the consultation paper by September 6.
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First published: August 17, 2024 | 15:30 IS
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