Dos and don’ts relating to green debt securities to avoid occurrences of greenwashing
Summary
This circular establishes dos and don'ts for issuers of green debt securities to prevent greenwashing. It mandates continuous monitoring of environmental impact, strict adherence to the definition of green debt securities, and accurate disclosure practices. The provisions are effective immediately and are appended as a new chapter to the existing Operational Circular.
Text
Regulation 2(1)(q) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 defines 'green debt security' and Chapter IX of the Operational Circular provides initial and continuous disclosure requirements.
The generally accepted definition of 'Greenwashing' is making false, misleading, unsubstantiated, or otherwise incomplete claims about the sustainability of a product, service, or business operation.
While raising funds for transition towards a greener pathway, it shall continuously monitor to check whether the path undertaken towards more sustainable form of operations is resulting in reduction of the adverse environmental impact and contributing towards sustainable economy, as envisaged in the offer document.
It shall not utilize funds raised through green bonds for purposes that would not fall under the definition of ‘green debt security’ under the NCS Regulations.
In case any such instances mentioned in (ii) above come to light regarding the green debt securities already issued, it shall disclose the same to the investors and, if required, by majority of debenture holders, undertake early redemption of such debt securities.
It shall not use misleading labels, hide trade-offs or cherry pick data from research to highlight green practices while obscuring others that are unfavourable in this behalf.
It shall maintain highest standards associated with issue of green debt security while adhering to the rating assigned to it.
It shall quantify the negative externalities associated with utilization of the funds raised through green debt security.
It shall not make untrue claims giving false impression of certification by a third-party entity.
The provisions of this circular shall come into force with immediate effect. The provisions of this circular shall be appended as new Chapter IX-A of the Operational Circular.
The Circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 55 (1) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
Source: SecMarx — Dos and don’ts relating to green debt securities to avoid occurrences of greenwashing. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.