Help Draft SEBI’s ‘Sustainable Finance’ Plan to Protect Environment With Investments

When you think of sustainability, your mind meanders to products and lifestyle changes one can adopt for a sustainable future. But did you know sustainable policy goes beyond the direct concepts of plastic bans, the felling of trees, etc?

The Securities and Exchange Board of India (SEBI) is looking to adopt new policies that promote sustainable finance, i.e. taking into account environment, social and governance considerations while making investment decisions in the financial sector. 

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To promote such sustainable finance, in 2017, SEBI introduced the concept of ‘Green Debt Securities’ or what is commonly known as ‘Green Bonds’. These Green Bonds were issued to investors by those undertaking projects and assets relating to renewable and sustainable energy, clean transportation, climate change adaption, etc. The primary objective behind such initiatives was to channel private investments into projects that have a positive impact on the environment. 

Since the adaptation of this concept in 2017, India raised about $ 7 billion through these bonds. Still, this capital has not been close to what its contemporaries have reasons for which vary from lack of demand for green bonds to favourable pricing offered overseas. 

Moreover, with the lack of a definition of what ‘green’ activities entail, there is hesitance on part of banks and lenders to finance such assets. 

SEBI, considering these reasons, is looking to make regulatory changes that would make it easier for investors to avail such bonds in India as well as easier compliance for project owners to make it favourable to issue these bonds. 

Along with amending provisions relating to Green Bonds, SEBI is looking to introduce the concept of ‘Blue Bonds’ for activities and projects that deal with the sustainable use of ocean resources for economic growth. 

Furthermore, SEBI is also recommending changing the definition of ‘Green Debt Security’ to include pollution prevention and control and circular economy-adapted products as eligible green projects within its ambit. It has also suggested several changes in disclosure requirements that relate to temporary utilisation of proceeds, utilisation of profits on a bond-by-bond basis, impact reporting, enhancing transparency and so on. 

All of these new recommendations have been concentrated on a consultation paper, on which SEBI is currently seeking feedback from citizens and stakeholders. This feedback will be essential in helping SEBI develop a policy on regulating Green and Blue Bonds that would be favourable to all involved. 

Sustainable finance is going to significantly contribute to the challenge to mitigate climate change. Are you someone who works on environmentally friendly projects or even someone looking to invest in such activities? Share your feedback with SEBI, either on Civis by clicking on this link or send your comments to pradeepr@sebi.gov.in before 30 September 2022.

Shonottra Kumar is a Senior Associate for Outreach and Communications at Civis.vote, a non-profit platform that works to build dialogue between governments and citizens, using technology to bridge the gap between the two. Edited by Yoshita Rao

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