Sebi Issues Guidelines On Green Debt Securities

Posted On - 27 February, 2023 • By - Kunal Mansharamani

The Security and Exchange Board of India (SEBI) vide its circular dated February 03’ 2023 issued guidelines[1] for the DOs and Don’ts of listing Green Debt Securities. Regulation 2(1) (q) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 defines ‘Green Debt Security’.  

However, the legal framework for ‘Green Debt Securities’ was reviewed recently and there were certain concerns raised with respect to Greenwashing. The generally accepted definition for “Greenwashing” is making false, misleading, unsubstantiated or otherwise incomplete claims about the sustainability of a product, service or business operation.” 

Therefore, SEBI issued certain guidelines to avoid the occurrence of greenwashing: 

  • That in the process of raising funds towards a greener pathway, shall consistently monitor to check whether the path undertaken towards renewal form of operations result in a decrease in the impact on environmental adversities.  
  • That the funds raised through the procedure shall not be utilized for the purposes provided under the concept of “Green Debt Security” under the NCS regulations.  
  • In case of any atrocities mentioned in the above clause, the said shall be disclosed to the investors and if required, shall make adequate measures and warrants for it. 
  • The purpose should not be misguiding labels, obscuring or hiding any such data from the research to highlight any such practices obscuring others. 
  • To maintain the highest standards in relation to the issue to green debt security in consonance with the rating assigned to it.  
  • It shall minimize and neutralize the negative issues arising out of the utilization of funds raised through it. 
  •  It shall make any fraudulent and unwarranted claims regarding untrue certification by a third-party entity. 

The said circular is in the exercise of Section 11(1) of the Securities and Exchange Board of India, 1992 read with Regulation 55(1) of the SEBI (Issue and Listing of Non- convertible Securities) Regulations, 2021 in order to protect the investors and for smooth functioning of the securities market.   

[1]https://www.sebi.gov.in/legal/circulars/feb-2023/dos-and-don-ts-relating-to-green-debt-securities-to-avoid-occurrences-of-greenwashing_67828.html