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- New ESG products: SEBI suggests launching bonds that are tied to social and environmental sustainability as well as other sustainable securitized financial instruments.
- Growth in the market: This year, India issued $15.6 billion in ESG debt, breaking previous records and indicating a rise in interest in sustainable financing.
- Global positioning: Improving India’s ESG framework might help Prime Minister Modi achieve his goal of green growth and establish his country as a major force in the world ESG market.
The Securities and Exchange Board of India (SEBI) plans to add new ESG-labeled products to its securities market, expanding the sustainable finance offerings. The variety of investment products available for obtaining sustainable finance would be greatly diversified under the proposed framework, which includes the creation of sustainable securitized debt instruments, or “green securitization.”
In addition to the current green debt instruments, issuers may soon be allowed to raise money through social bonds, sustainable bonds, and sustainability-linked bonds, according to SEBI’s consultation document. The purpose of this expansion is to direct more funding toward initiatives that tackle governance, social, and environmental issues (ESG issues).
India’s ESG debt issuance has already surpassed its previous yearly high in 2021, rising to $15.6 billion this year. Notwithstanding the fact that the volume currently trails other significant Asian economies like China and Japan, this rise indicates a robust momentum in sustainable financing.
With the new regulations, issuers will be able to seek finance for more sustainable projects than merely environmental sustainability, such as water management or renewable energy. SEBI will keep consulting until September 6, which can result in important changes to the regulations.
These advancements occur at a crucial moment for India, as a more robust ESG debt market might help fight the worldwide slowdown in ESG bond issuances as well as Prime Minister Narendra Modi’s goals for green growth, especially in light of the declining activity in the Chinese market. In comparison to the same period last year, Sustainable Fitch recently announced a nearly one-third decrease in the total amount of bonds with an ESG label in the second quarter.
In the event that SEBI’s consultation results in regulatory modifications, onshore bond regulation would be made possible, further solidifying India’s standing in the international ESG market. There is opportunity for more expansion and diversification in this industry since several of India’s largest firms, including Adani Group divisions, have already started issuing social and sustainability-linked bonds in foreign currency through private placements or listings overseas.