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19 Nov 2024
The Securities and Exchange Board of India (Sebi) has proposed broadening the sustainable finance framework in the securities market by introducing new financial instruments.
These would include Social Bonds, Sustainable Bonds, and Sustainability-linked Bonds, expanding beyond the existing green debt securities. The goal is to give issuers more flexibility in raising funds for projects that align with environmental, social, and governance (ESG) goals.
In a consultation paper released on Friday, Sebi suggested that in addition to current green debt securities, issuers should be allowed to issue these new types of bonds, collectively referred to as ESG Debt Securities. This expansion would help issuers finance more sustainable projects and contribute to closing the funding gap for Sustainable Development Goals.
Sebi noted that it received requests from market participants, including the Confederation of Indian Industry, to include Social Bonds within the sustainable finance framework, aligning with global practices. The consultation paper also introduced the concept of Sustainable Securitised Debt Instruments, enabling originators of credit facilities that meet international or domestic sustainable finance standards to raise funds. Investors would also have the opportunity to invest in these instruments.
The paper addressed initial and ongoing disclosure requirements for sustainable securitised debt instruments, aligning with international frameworks. Initial disclosures could be included in the securities' offer document, while ongoing disclosures might appear in annual reports or other required formats.
Sebi also recommended that issuers of ESG debt securities and sustainable securitised debt instruments engage an independent external reviewer or certifier to ensure transparency and credibility. This review could involve second-party opinions, verification, certification, or rating. Public comments and suggestions on the consultation paper are invited by September 6.
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