Securities and Exchange Board of India (Sebi) strengthened the framework for green bonds by introducing the concept of ‘blue’ and ‘yellow’ bonds as new modes of sustainable finance.
It has notified the inclusion of specific subcategories (blue and yellow) within the definition of green debt security. Blue bonds are modes of sustainable finance raised for sustainable maritime sector including sustainable fishing, sustainable water management etc. Yellow bonds are modes of sustainable finance raised for solar energy generation and the associated upstream and downstream industries.
The notification says, “In exercise of the powers conferred under section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021, These regulations may be called the Securities and Exchange Board of India (Issue and Listing of NonConvertible Securities) (Amendment) Regulations, 2023.
The main objective of this amendment is to expanding the definition of ‘green debt security’ and incidental matters. It has also included new modes of sustainable finance in relation to pollution prevention and control and eco-efficient products.
These actions were taken against the backdrop of growing interest in sustainable finance both in India and around the world. They also aim to align the existing framework for green debt securities (GBP) with the updated Green Bond Principles, which are recognized by IOSCO.
The regulatory framework defines Green Debt Securities as debt securities issued for raising funds that are to be utilised for projects or assets falling under certain categories.
In November, the regulator released a consultation paper. It stated that one of its main obstacles to further growth was a consistent, robust approach to identifying what is ‘green’. This lack of clarity can lead to “greenwashing”.
Regarding Period of subscription, Sebi said A public issue of debt securities or, non-convertible redeemable preference shares shall be kept open for a minimum of three working days and a maximum of ten working days.
In case of a revision in the price band or yield, the issuer shall extend the bidding (issue) period disclosed in the offer document for a minimum period of three working days. In case of force majeure, banking strike or similar circumstances, the issuer may, for reasons to be recorded in writing, extend the bidding (issue) period disclosed in the offer document.
The rules allow an issuer of non-convertible securities to recall these securities before their maturity date.
The notification states that the issuer of green bonds must notify all eligible holders and debenture trustees of non-convertible securities prior to maturity of a notice concerning recall or redemption.
The issuer must simultaneously give a copy to the stock exchange where non-convertible securities are listed. This notice will be available on the stock exchange’s website.
The trust deed must be executed by the issuer and the trustee of debentures. It should contain a clause mandating that the issuer appoints the nominee of the trustee to its board of directors within one month of receiving the nomination from the trustee.
View the official notification here: