Issuers of municipal debt securities can issue green bonds: Sebi

Capital markets regulatorSebion Thursday said issuers ofmunicipal debt securitiescan issue green bonds in compliance with rules governing issue and listing of non-convertible securities. A green bond is like any other bond where a debt instrument is issued by an entity for raising funds from investors. The proceeds of a green bond offering are ‘ear-marked’ for use towards financing green projects.

Sebi (Issue and Listing of Municipal Debt Securities) or ILMDS rules provide the framework for issuance and listing of municipal debt securities. It also specified the continuous disclosure and compliance requirements to be complied with by issuers of Municipal Debt Securities.

The ILMDS rules do not define ‘green debt security’.

However, Sebi’s (Issue and Listing of Non-Convertible Securities) or NCS norms defines green debt security. Further the regulator, in 2021, came out with operational guidelines providing the initial and continuous disclosure requirements for entities issuing or proposing to issue green debt securities.

The regulator said it has received representations from market participants on the compliances an issuer under the ILMDS Regulations would have to undertake in case it is desirous of issuing a green debt security, in the absence of similar provisions in the ILMDS norms.

“Accordingly, an issuer under the ILMDS Regulations may issue a green debt security if it falls within the definition of “green debt security”, as per…NCS Regulations,” the Securities and Exchange Board of India (Sebi) said in a circular.

In addition to the requirements prescribed under the ILMDS rules, such issuer will have to comply with the provisions for green debt security specified in NCS rules.

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