SEBI vide its Circular dated 6th February, 2023 undertook a review of the regulatory framework for green debt securities referred Chapter IX of the SEBI Circular SEBI/HO/DDHS/P/CIR/2021/613 dated August 10, 2021 (updated as on April 13, 2022).
| Accordingly, the Chapter IX of the NCS Operational Circular shall be replaced with the following: Initial disclosure requirements for issue and listing of green debt securities An issuer desirous of issuing green debt securities shall make the following additional disclosures in the offer document for public issues / private placements: A statement on environmental sustainability objectives of the issue of green debt securities; Brief details of decision-making process followed/proposed for determining the eligibility of project(s) and/or asset(s), for which the proceeds are being raised through issuance of green debt securities, such as: Process followed/ to be followed for determining how the project(s) and/or asset(s) fit within the eligible green projects categories as defined under Regulation 2 (1) (q) of NCS Regulations, The criteria making the project(s) and/ or asset(s) eligible for using the green debt securities proceeds; and Details of taxonomies, green standards or certifications both Indian and global, if any referenced and the alignment of projects with said taxonomies, related eligibility criteria, and exclusion criteria, if applicable. d) Details of the alignment of the objective of the issue with the India’s Intended Nationally Determined Contributions in case of the proceeds raised though issuance of transition bonds. Details of the system/procedures to be employed for tracking the deployment of the proceeds of the issue. Details of the project(s) and/or asset(s) or areas where the issuer, proposes to utilise the proceeds of the issue of green debt securities, including towards refinancing of existing green project(s) and/or asset(s), if any. Details of an indicative estimate of distribution of proceeds raised though issuance of green debt security between financing and refinancing of project(s) and/ or asset(s); if applicable. Details of the intended types of temporary placement of the unallocated and unutilised net proceeds from the issue of green debt securities. Details related to the perceived social and environmental risks and proposed mitigation plan associated with the project(s) proposed to be financed/ refinanced through the proceeds from the issue of green debt securities. The issuer shall appoint an independent third party reviewer/ certifier, for reviewing/certifying the processes including project evaluation and selection criteria, project categories eligible for financing by green debt securities, etc. The said requirement of appointing a third party reviewer/ certifier is applicable on a ‘comply or explain’ basis for a period of two years. ‘Comply or explain’ for the purpose of the above, shall mean that the issuer shall endeavour to comply with the provisions and achieve full compliance by two years from the date of issuance of the circular. In case the entity is not able to achieve full compliance with the provisions till such time, the issuer shall in its annual report, explain the reasons for such non-compliance/ partial compliance and the steps initiated to achieve full compliance. Continuous disclosure requirements for listed green debt securities: An issuer who has listed green debt securities, shall provide following additional disclosures along with its annual report and financial results: Utilisation of the proceeds of the issue, as per the tracking done by the issuer using the internal process as disclosed in offer document. Utilisation of the proceeds shall be verified by the report of an external auditor, to verify the internal tracking method and the allocation of funds towards the project(s) and/or asset(s), from the proceeds of green debt securities. Details of unutilized proceeds including the temporary placement/utilization of unallocated and unutilized proceeds from each ISIN of green debt security issued by the issuer. The following additional disclosures shall be made in the Annual Report: List of project(s) and/or asset(s) to which proceeds of the Green Debt Securities have been allocated/invested including a brief description of such project(s) and/or asset(s) and the amounts disbursed; Qualitative performance indicators and, where feasible, quantitative performance measures of the environmental impact of the project(s) and/or asset(s). If the quantitative benefits/impact cannot be ascertained, then the said fact may be appropriately disclosed along with the reasons for nonascertainment of the benefits/impact on the environment; Methods and the key underlying assumptions used in preparation of the performance indicators and metrics; Details of the deployment of the mitigation plan (as disclosed in the offer documents) for the perceived social and environmental risks. Impact Reporting: Information, on a project-by-project basis, pertaining to reporting of the environmental impact of the projects financed by the green debt securities. Reporting standards or taxonomies followed by the issuer with regard to reporting of environmental impact, if any, shall also be disclosed. Disclosures of major elements of Business Responsibility and Sustainability Reporting (BRSR) as mentioned in Annex I to this circular. An issuer shall appoint a third party reviewer/ certifier for a green debt security for the following: Post-issue management of the use of proceeds from the green debt security, Verification of the internal tracking and impact reporting. The said requirement of appointing a third party reviewer/ certifier is applicable on a ‘comply or explain’ basis for a period of two years. ‘Comply or explain’ for the purpose of the above, shall mean that the issuer shall endeavour to comply with the provisions and achieve full compliance by two years from the date of issuance of the circular. In case the entity is not able to achieve full compliance with the provisions till such time, the issuer shall in its annual report, explain the reasons for such non-compliance/ partial compliance and the steps initiated to achieve full compliance. Responsibilities of the issuer: An issuer of green debt securities shall: 4Maintain a decision-making process which it uses to determine the continuing eligibility of the project(s) and/or asset(s). This includes, without limitation statement on the environmental objectives of the green debt securities and a process to determine whether the project(s) and/or asset(s) meet the eligibility requirements; Ensure that all project(s) and/or asset(s) funded by the proceeds of green debt securities, meet the documented objectives of green debt securities; Utilise the proceeds only for the stated purpose, as disclosed in the offer document; and Ensure compliance with the SEBI circular SEBI/HO/DDHS/DDHSRACPOD1/P/CIR/2023/020 dated February 03, 2023 on “Dos and don’ts relating to green debt securities to avoid occurrences of greenwashing” |
This Circular is applicable to all Issuers who have listed/ propose to list green debt securities, Recognized Stock Exchanges, Registered Merchant Bankers, Registered Debenture Trustees, Registered Credit Rating Agencies and shall come into force for all issues of green debt securities launched on or after 1st April, 2023.
About the Author
