Sebi allows issuers of municipal debt securities to issue green bonds


Market regulator, Sebi on Thursday announced that issuers of municipal debt securities can issue green bonds in compliance with the guidelines for issuance and listing non-convertible debentures. This circular has come into force with immediate effect. The move is to protect the interest of investors in securities and promote the development of, and regulate the securities market.

In its circular, Sebi pointed out that the Issue and Listing of Municipal Debt Securities Regulations (ILMDS) do not define ‘green debt security’.

The market watchdog received representations from market participants on the compliances an issuer under the ILMDS Regulations would have to undertake in case it is desirous of issuing green debt security, in the absence of similar provisions in the ILMDS Regulations.

Green bonds are just like any other bond where a debt instrument is issued by an issuer for raising funds from investors. However, the difference between a green bond from other bonds is that the proceeds of a green bond offering are ‘ear-marked’ for use towards financing ‘green’ projects.

Accordingly, Sebi said, “an issuer under the ILMDS Regulations may issue a green debt security if it falls within the definition of “green debt security”, as per Regulation..”

Further, Sebi added, “such issuer, shall, in addition to the requirements prescribed under the ILMDS Regulations and circulars issued thereunder, comply with the provisions for ‘green debt security’, as specified under the NCS Regulations and circulars issued thereunder.”

Sebi advised stock exchanges and depositors to make amendments to the relevant bye-laws, rules, and regulations for the implementation of this decision. Also, they are directed to carry out system changes and disseminate the provisions of this circular on their website.

Also, Sebi asked depositors and stock exchanges to monitor the compliance of such issuances in terms of relevant provisions under NCS regulations including the circular issued thereunder.

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