The SEBI is poised to enhance its regulatory framework for sustainable bonds by incorporating social, sustainability, and sustainability-linked bonds, alongside the novel inclusion of sustainable securitised debt instruments.
According to Environmental Finance, this move seeks to diversify the traditional green bond market, which has primarily focused on environmental projects, to include broader social and sustainability goals.
The Indian financial regulator has observed significant market interest in this expansion and has consequently initiated a public consultation process, which will conclude on 6 September. Since 2017, SEBI has established a robust structure around green debt securities but seeks to extend these principles to cover a wider array of sustainable financial instruments.
The proposed expansion will necessitate the appointment of an independent external reviewer for these new bond categories, mirroring the existing requirements for green bonds.
Moreover, the momentum in India’s sustainable bond market is evident, with over $5.4bn raised in 2024 to date, marking a 10% increase compared to the same period in 2021. This year is on track to surpass the previous record of $8.6bn raised throughout 2021. Despite this growth, sustainable bonds have generated a total of $35bn to date, with a substantial portion stemming from green bonds. Notably, half of the $10bn raised since 2023 has been through the sovereign green bond issuance programme initiated earlier in the year.
This proposed expansion by SEBI reflects a strategic shift towards integrating social and environmental considerations into the core financial systems, promoting a holistic approach to sustainability within India’s capital markets.
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