Concept of ‘Blue’ and ‘Yellow’ bonds introduced by SEBI

Concept of ‘Blue’ and ‘Yellow’ bonds introduced by SEBI

Recently, the Securities and Exchange Board of India (SEBI) has introduced the concept of ‘Blue’ and ‘Yellow’ bonds.

SEBI has strengthened the Green Bond framework by introducing the concept of ‘Blue’ and ‘Yellow’ bonds.

SEBI has amended the 2021 Regulations to expand the definition of the scope of Green Debt Securities (GDS).

The amendment has been made through the SEBI (Issue and Listing of Non-Convertible Securities) (Amendment) Regulations, 2023, in exercise of the powers conferred under the SEBI Act, 1992.

SEBI defines “green debt security” as a debt security that is issued to raise funds for projects such as renewable and sustainable energy, clean transportation, and sustainable waste management.

As per the new framework, the categories of projects and assets under GDS have been expanded to include the following:

  • Blue Bonds: This includes funds raised for sustainable water management, including clean water and water recycling. It also includes sustainable maritime sector including shipping, fishing, ocean energy, mapping etc.
  • Yellow Bonds: These include funds raised for solar power generation and associated upstream and downstream industries.
  • Transition Bonds: This includes funds raised to transition to more sustainable operations. This is in line with India’s Intended Nationally Determined Contributions.

Significance of the new amendment/step

  • The move provides greater clarity regarding what is considered ‘green’. Thus preventing ‘green-washing’.
  • Green-washing refers to making false, misleading, unsubstantiated or incomplete claims about the sustainability of a product, service or business operation.
  • This helps in attracting sustainable finance.
  • In addition, it aligns the existing framework of GDS with the updated Green Bond Principles (GBP) recognized by IOSCO.

International Organization of Securities Commissions (IOSCO)

  • It is an international organization that brings together the world’s securities regulators on a single platform. It is recognized as the global standard setter for the securities sector.
  • SEBI is a member of the IOSCO board.

Source – Economic Times

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