SEBI proposes to expand sustainable finance framework in securities market

Business: Market regulator Sebi has proposed to expand the sustainable finance framework in the securities market by introducing a new category of financial instruments. This category will include social bonds, sustainable bonds and sustainability-linked bonds in addition to the existing green debt securities. It aims to provide flexibility to issuers to raise funds for projects aligned with environmental, social and governance (ESG) objectives. In a consultation paper released on Friday, Sebi proposed that in addition to the existing green debt securities, issuers should be allowed to raise funds by issuing social bonds, sustainable bonds and sustainability-linked bonds. These bonds will be collectively known as ESG debt securities. This will enable issuers to raise funds for more sustainable projects, helping to meet the funding gap for sustainable development goals. Sebi said it has received representations from market participants, including the Confederation of Indian Industry, to expand the scope of the regulatory framework relating to sustainable finance to include social bonds in addition to existing green debt securities as a way of raising sustainable finance in line with global practices. According to the consultation paper, Sebi said, “It is proposed to introduce the concept of sustainable securitised debt instruments, with an aim to provide originators of underlying debt facilities, access to such international or domestic frameworks for sustainable finance, and thereby provide investors also an opportunity to participate in sustainable securitised debt instruments”. The consultation paper also addresses initial and continuing disclosures for sustainable securitised debt instruments which will be based on international frameworks.