I have heard SEBI has listed new guidelines green bonds. Can i invest in such bonds? Are they safe?


#1

I have heard SEBI has listed new gI have heard SEBI has listed new guidelines green bonds. Can i invest in such bonds? Are they safe?


#2

Green bonds are debt instruments that invest in clean energy companies. Such bonds are issued by banks, big companies or government entities. Green bonds are just about gaining popularity in India and hence SEBI has come up with guidelines for all such bonds. Unfortunately green bonds are not available for smaller investment as of now and hence you cannot invest as a retail investor directly. Green bonds are open for investment by insurance companies, mutual fund companies, pension funds and the likes.


#3

Hi Vichu,

Yes you are right. The Securities Board Of India (SEBI) finalised norms for issuance and listing of green bonds, which will help in raising funds from capital markets for investment in the renewable energy space. So, the issuer of a green bond will have to make a disclosure about environmental objectives of the issue of such securities in the offer documents.

Besides, issues would have to provide details of the systems and procedures to be employed for tracking the proceeds of the issue, including the investments made and earmarked for eligible projects in the offer documents.

In addition, the issuer would have to make disclosures including use of proceeds, list of projects to which green bond proceeds have been allocated in the annual report and periodical filings made to the stock exchanges.

The issuer can appoint an independent third party reviewer, certifier or validator for reviewing, certifying and validating the pre-issuance and post-issuance process including project evaluation and selection criteria.

A green bond is like any other bond where a debt instrument is issued by an entity for raising funds from investors. However, what differentiates a green bond from other bonds is that the proceeds of a Green Bond offering are ‘ear- marked’ for use towards financing green projects.

The first risk with green bonds is a lack of liquidity. This is still a small market, and getting in and out of positions will not be easy. If you’re looking for a liquid investment, then you should consider avoiding green bonds.

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Cheers,
Team BB