Mumbai – SEBI has built its green bond rules around a single idea: a label is worthless unless somebody independent checks it, twice.
Amendments to the non-convertible securities regulations brought environmental, social and governance debt inside the Indian framework, covering green, social, sustainability and sustainability-linked instruments.
What an issuer must disclose
An issuer must state its environmental objectives, explain how proceeds will be tracked, and describe the process for identifying eligible assets. Disclosure continues after issue rather than ending at it, and independent third-party review is required both before and after.
Tracking is the provision that does the work. Money is fungible, and the standard failure of green bonds worldwide is proceeds landing in a general account and funding whatever the treasury was funding anyway. Requiring a traceable path from issue to asset is what separates a green bond from a bond with an adjective.
Sustainability-linked bonds work differently
A green bond restricts what proceeds may fund. A sustainability-linked bond lets an issuer spend freely but adjusts the coupon against performance targets, so failure costs money.
That structure suits companies whose transition is about changing existing operations rather than building new green assets, which describes most Indian heavy industry. Its weakness is target calibration. A target the issuer would have met regardless produces a discount for nothing.
The market is real but thin
Issuance since the framework took effect includes sustainability-linked bonds from Larsen and Toubro and Mindspace Business Parks REIT, and green issues from municipal corporations and Bank of Baroda.
Municipal green bonds deserve attention out of proportion to their size. Urban local bodies carry much of India climate adaptation burden and have the weakest access to capital, so a working municipal green bond market would matter more than another corporate issue.
Source: SEBI circulars on green debt securities and avoidance of greenwashing, and amendments to the Issue and Listing of Non-Convertible Securities Regulations.
