SEBI and the Reform on Sustainable Finance (Part 1 of 3)

Abstract

Frequent environmental disasters and extreme weather events have led to the crying need for dealing with climate change and the need to finance the same sustainably. Corporate finance being driven purely by wealth maximization / profit motive, without considering the environmental and social impacts of the activities of the firms, has alleviated the need for sustainable finance.

To provide for the avenues to both issuers and investors for sustainable finance, Governments and Capital Market Regulators across the globe have come up with various policy measures including frameworks pertaining to sustainable finance; SEBI regulates the capital market in India and has come up with the framework for green debt securities for the listed/propose to be listed issuers and the same have been amended from time to time to cater to the changing market landscape.

While sustainable finance is gaining popularity, concerns regarding the greenwashing are also rising across the globe as there is no universal consensus on “what is greenâ€. SEBI has addressed the issue of the greenwashing by strengthening the disclosure requirements and prescribing certain dos and don’ts to avoid the instances of the greenwashing.

The article, in three parts, focuses on the SEBI’s efforts to align its green bond framework with the updated Green Bond Principles (GBP) of International Capital Market Association (ICMA) while incorporating the domestic market needs by including “transition finance†in the definition of green debt security.