Regulatory framework for the issuance of green debt securities in India – Finance and Banking



India: Regulatory framework for the issuance of green debt securities in India

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  • Over the past decade, projects that aim to promote sustainable development by adopting alternative means to achieve a goal without harming the environment (green projects) have grown in popularity. Renewable power companies using renewable sources such as solar and wind power rather than fossil fuels to generate electricity, adopting electronic and low-carbon means of transportation, building green residential homes, recycling, etc. are just a few of the many examples of green projects.
  • It goes without saying that such innovative means require financial support to conduct research, develop the project or set up the infrastructure for it. Therefore, it was necessary to design a financial instrument to encourage investors to invest in green projects. This gave birth to the concept of green bonds or green debt securities.
  • The first round of green debt securities issued in India was in 2015 by Yes Bank for the financing of renewable and clean energy projects. Since then, there has been no turning back with issuers like Greenko Group, ReNew Group, JSW Hydro Energy, India Green Power Holdings, Shriram Transport Finance Company Limited and UltraTech Cement Limited recently issuing green debt securities. .

Regulatory framework for green debt securities

  • Conceptually, green debt securities are like all other debt securities issued for the purpose of raising funds. However, the distinctive features of green debt securities are (i) the end use of the funds raised must be fully allocated to green projects, i.e. business activities and environmentally friendly product offerings ; and (ii) the project appraisal and selection process, revenue management and reporting.
  • In India, green debt securities can be issued by companies in both unlisted and listed forms. While for unlisted green debt securities, there are no specific guidelines beyond the general requirements for issuing debt securities, issues of listed green debt securities must comply with additional stipulations of the following regulations:
    1. The SEBI regulation (issuance and listing of non-convertible securities), 2021 (NCS regulations);
    2. The SEBI Regulation (Registration Obligations and Disclosure Requirements), 2015 (LODR Regulation); and
    3. Chapter IX of the SEBI Operational Circular for the Issue and Listing of Non-Convertible Securities (SEBI operational circular),

    collectively referred to as “Green Debt Securities Regulations“.

End use requirements

  • Under NCS regulations, only debt securities issued to raise funds that are to be fully utilized for projects and / or assets falling within any of the following categories qualify as “Green debt securities“:
    1. renewable and sustainable energy, including wind, solar, bioenergy, other energy sources using clean technologies;
    2. clean transport, including public / public transport;
    3. sustainable water management, including clean and / or potable water, water recycling;
    4. adaptation to climate change;
    5. energy efficiency, including efficient and green buildings;
    6. sustainable waste management, including recycling, energy recovery, efficient waste disposal;
    7. sustainable land use, including sustainable forestry and agriculture, afforestation;
    8. conservation of biodiversity; Where
    9. any other category that may be specified by SEBI from time to time.


  • The SEBI operational circular consolidated several circulars. among other things, on non-convertible securities issued by SEBI over a period of time. It replaced the 2017 circular on green debt securities. Chapter IX of the SEBI Operational Circular prescribes additional disclosure requirements regarding the issuance of green debt securities in the offering documents relating to green debt securities in addition to the disclosure requirements for the public or private placement of NCD in under NCS and SEBI Operational Circular regulations, including:
    1. statement of the environmental objectives of the issuance of green debt securities;
    2. brief details to be considered by the issuer in determining the eligibility of the project for which the funds are raised through the issuance of green debt securities. These should include the process followed to determine how the project fits into one of the categories of green projects that are listed under the definition of “green debt securities”, the criteria for using the proceeds of the proposed issue. to finance the ‘eligible green debt securities projects and environmental sustainability goals of green investment;
    3. details of the procedures implemented to monitor the deployment of funds;
    4. details of projects or assets or areas in which the issuer proposes to use the proceeds of the proposed green debt issuance. Details should include whether funds are being raised for refinancing existing projects or assets;
    5. if appointed, details of the independent third party reviewer / certifier appointed by the issuer to review / certify the processes, including project evaluation and selection criteria, categories of projects eligible for funding by green debt securities, etc. This appointment is optional but if appointed, the necessary information in this regard must be provided in the offer document.
  • In addition to this information in the offer document, the issuer of a listed Green Debt Security is also required to regularly provide the following information:
    1. Financial results on a semi-annual and annual basis as well as details of the use of proceeds from the green debt issuance and unused proceeds, if any. The use of funds is verified by the report of an external auditor;
    2. Issuer’s annual report with the required information which must also contain:
      1. list of projects / assets to which the proceeds from the green debt issuance are injected, including descriptions of these projects and the allocation of the amount. However, there is an exception for confidential projects, in which case disclosure of the domains of those projects / assets will suffice;
      2. qualitative and quantitative performance indicators of the environmental impact of projects / assets. In the event that the quantitative benefits / impacts cannot be determined, the necessary disclosures in this regard should be made as well as the reasons for not determining the environmental benefits / impacts;
      3. methods and key underlying assumptions used in the preparation of indicators and performance measures.
  • In addition, each issuer of a listed debt security is required to provide regular information to the relevant stock exchange and, where applicable, to SEBI in accordance with LODR regulations.

Other requirements

  • In addition to the aforementioned points, the SEBI Operational Circular also imposes certain obligations on the issuer of Green Debt Securities. Projects financed by the proceeds of Green Debt Securities must not only meet the eligibility criteria, but must also maintain this eligibility throughout their lifecycle as well as their environmental objectives as described in the offering document. Issuers are required to maintain a decision-making process to ensure this continuity as well as respect for the use of the product.


  • The benefits of raising funds through the issuance of green debt securities cannot be overstated. In addition to being a positive step towards sustainable finance, green debt securities are also likely to attract capital from global institutions and investors for green projects. This will further contribute to India’s ambitious renewable energy and sustainable development goals.
  • The creation of the regulatory framework in India for the issuance of green debt securities is a welcome first step towards sustainable finance. The Indian government and regulators should take more steps to attract significant growth in the green debt market, including addressing regulatory uncertainties in the award of green projects, timely execution of green projects across the board. sectors, removing bureaucratic hurdles to get approvals and clarifications, setting up effective dispute resolution forums, addressing the lack of accreditation policies and procedures for green projects, etc. giant companies and financial institutions.

The content of this document does not necessarily reflect the views / position of Khaitan & Co but remains solely those of the author (s). For any further questions or follow-up, please contact Khaitan & Co at [email protected]

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