The Securities and Exchange Board of India (SEBI) has proposed an expansion of the sustainable finance framework within the securities market, introducing a new category of financial instruments aimed at supporting environmental, social, and governance (ESG) objectives.
This new category will encompass Social Bonds, Sustainable Bonds, and Sustainability-linked Bonds, in addition to the existing Green Debt Securities. The initiative aims to provide issuers with greater flexibility in raising funds for projects aligned with ESG goals.
In a consultation paper released on Friday, SEBI suggested that issuers be permitted to raise funds through these new bonds, collectively referred to as ESG Debt Securities. This move is expected to enable issuers to secure financing for more sustainable projects, helping to close the funding gap for the Sustainable Development Goals (SDGs).
SEBI noted that it had received representations from market participants, including the Confederation of Indian Industry, advocating for an expanded regulatory framework for sustainable finance. The inclusion of Social Bonds alongside Green Debt Securities is intended to align with global practices in sustainable finance.
The consultation paper also proposes the introduction of Sustainable Securitised Debt Instruments. These instruments would allow originators of underlying credit facilities, which adhere to international or domestic sustainable finance frameworks, to issue securities, thereby offering investors an opportunity to participate in sustainable securitised debt instruments.
SEBI further outlined requirements for initial and continuous disclosures related to these sustainable securitised debt instruments. Initial disclosures are expected to be made in the securities' offer documents, while continuous disclosures would be included in annual reports or other mandated formats, based on international standards.
To ensure transparency and credibility, SEBI has suggested that issuers of ESG Debt Securities and Sustainable Securitised Debt Instruments appoint an independent external reviewer or certifier. This review could take various forms, including second-party opinions, verification, certification, or scoring/rating.
SEBI has invited public comments and suggestions on the consultation paper, with submissions due by 6 September.
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