Securities and Exchange Board of India (Sebi) after taking into account inputs from the finance and environment ministries, as also from the Ministry of New and Renewable Energy (MNRE), has finalized the norms for the listing of green bonds which will help in raising funds from capital markets for investment in the renewable energy space.
A green bond is like any other debt instrument issued by an entity for raising funds from investors. However, what differentiates it from other bonds is that the proceeds are ear-marked for use towards financing green projects. As of now, there are no standard norms for green bonds.
Green bonds can be key to help meet an ambitious target India has of building 175 gigawatt of renewable energy capacity by 2022, which will require a massive estimated funding of USD 200 billion.
The new norms would also help the investors take informed investment decisions and bring in uniformity in the disclosure requirements, Sebi had said after its board approved the proposal last year. Financing needs of renewable energy space in the country require new channels to be explored, which can also help in reducing the cost of the capital.
Issuance and listing of green bonds will be governed by the Sebi regulations for debt securities but the issuer of green bonds will have to make incremental disclosures. These norms would 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.
The issuer will have to provide the details of systems and procedures to be employed for tracking the proceeds, the investments made and earmarked for eligible projects. The same would need to be verified by external auditors.