GREEN DEBT SECURITIES

Green debt securities

A  Debt security shall be considered as ‘Green Debt Securities’ if the funds raised through the issuance of the debt securities are to be utilized for the project or projects and/or asset(s) falling under any of the following categories-

• Renewable and sustainable energy including wind, solar, bioenergy, other sources of energy which use clean technology, etc.,;
• Clear transportation including mass/public transportations, etc.,
• Sustainable water management including clean and/or drinking water, water recycling, etc.,
• Climate change adaptation;
• Energy efficiency including efficient and green buildings etc.;
• Sustainable waste management including recycling, waste to energy, efficient disposal of wastage etc.,
• Sustainable land use including sustainable forestry and agriculture, afforestation, etc.,
• Any other category as may be specified by Securities and Exchange Board of India.

Disclosure requirements

Securities and Exchange Board of India (Issue and Listing Debt Securities) Regulations, 2008 govern public issue of debt securities and listing of debt securities through public issue or on private placement basis, on a recognized stock exchange.

For the issue of green debt securities and listing and listing privately placement the issuer is to comply in addition to the requirements as prescribed in Securities and Exchange Board of India (Issue and Listing Debt Securities) Regulations, 2008 and circulars made there under the Board require additional compliances.

Disclosure in offer document

The issue of a Green Debt Securities shall make the following disclosures-

• A statement on environment objectives of the issue of Green Debt Securities;
• Brief details of decision making process issuer has followed or would follow for determining the eligibility of project(s) and/or asset(s) for which the proceeds are being raised through issuance of Green Debt Securities.

An indicative guideline of the details to be provided is as under-

• process followed/to be followed for determining how the project(s) and/or asset(s) fit within the eligible green projects categories;
• the criteria, making the project(s) and/or asset(s) eligible for using the Green Debt Securities proceeds; and
• environmental sustainability objectives of the proposed green investment;

• Issuer shall provide the 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 utilize the proceeds of the issue of Green Debt Securities, including towards refinancing of existing green project(s) and/or asset(s), if any;
• The issuer may 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.,Such appointment is optional and is at the part of the issuer, however, any such appointment of reviewer/certifier shall be disclosed in the offer document.

Continuous disclosure requirement

The issuer shall provide the following disclosures along with its annual report and financial results-

1. The following shall be provided along with the half yearly and annual financial results-

• Utilization of the proceeds of the issue, as per the tracking done by the issuer using the internal process as disclosed in the offer document;
• The utilization 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 the Green Debt Securities;
• Details of unutilized proceeds.

2. The following additional disclosures have to be provided along with 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.
• Where confidential agreements limit the amount of detail that can be made available about specific project(s) and/or asset(s), information shall be presented about the areas in which such project(s) and/or asset(s) fall into;
• 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 or impact cannot be ascertained, then the said fact may be appropriately disclosed along with the reasons for non ascertainment of the benefits or impact on the environment;
• The methods and key underlying assumptions used in preparation of the performance indicators and metrics.

Responsibilities of the issuer

A Green Debt Securities issuer shall-

• maintain a decision making process which it uses to determine the continuing eligibility of the project(s) and/or asset(s);
• this includes, includes without limitation a 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 document objectives of Green Debit Securities;
• utilize the sale proceeds only for the stated purpose, as disclosed in the offer document.

An issuer of Green Debt Securities or any agent appointed by the issuer, if follows and globally accepted standard(s) for the issuance of Green Debt Securities including measurement of the environmental impact, identification of the project(s) and/or asset(s), utilization of proceeds, etc., shall disclose the same in the offer document/disclosure document and/or in continuous disclosure.