The SEBI vide notification no. dated February 02, 2023, had notified the amendment in the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021. As per the amended norms, the SEBI widened the scope of ‘Green debt security’ including yellow, blue and transition bonds under its purview.
Thereafter, SEBI received various comments/representations from the market participants, and in particular from the investors, to address the concerns of ‘greenwashing’.
While there are no universally accepted taxonomies on greenwashing, the generally accepted definition of ‘Greenwashing’ is, given as making false, misleading, unsubstantiated, or otherwise incomplete claims about the sustainability of a product, service, or business operation.
Therefore, in order to address the concerns of market participants, regarding greenwashing, the SEBI has now issued a list of Dos and Don’ts for the issuers of green debt securities in order to avoid its occurrence. The issuer of green debt securities is required to ensure the following:
(a) While raising funds for the transition towards a greener pathway, issuers requires to continuously monitor to check whether the path undertaken towards a more sustainable form of operations is resulting in a reduction of adverse environmental impact.
(b) Issuers must use funds for the purpose(s) falling under the definition of ‘green debt security’ only.
(c) Issuers must disclose the green debt securities already issued to the investors.
(d) Issuers must maintain the highest standards associated with the issue of green debt security while adhering to the rating assigned to it
(e) Issuers must quantify the negative externalities associated with the utilization of the funds raised through green debt security
(f) Issuers must not make untrue claims giving a false impression of certification by a third-party entity.
This Circular is applicable to all issuer who have listed / propose to list green debt securities and shall come into force with immediate effect.
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