Issuers of Municipal Debt Securities to Issue Green Debt Securities: SEBI

Issuers of Municipal Debt Securities to Issue Green Debt Securities: SEBI

A green debt security can be understood as an instrument which is issued to raise money for climate and environmental projects. It is also known as Climate Bond. It is used to finance and refinance the projects that contribute absolutely to the environment or climate. The green debt securities are similar to conventional debt securities, but the key difference between them is purpose for the finance. It means where the conventional debt securities are issued in regard to any project that is to be undertaken; the green debt securities are issued only for financing the projects related to the environment. The SEBI, in order to provide interim financing opportunities to the holders of the environmental projects, has allowed the issuers who dealt in municipal debt securities to issue Green debt Security in pursuance of the circular “Disclosures & compliance requirements for Issuance & Listing of Municipal Debt Securities under SEBI (Issue & Listing of Municipal Debt Securities) Regulations 2015, which fall within the definition of “green debt security” on 24th November 2022.

What is the Disclosure and Compliance requirement for Green Debt Securities?

The SEBI (Issue & listing of Municipal Debt Securities) Regulations, 2015 (ILMDS) provides for the listing and issuance of municipal debt securities and it shall mandatorily be adhered to by the issuers while issuing such securities. Further, the disclosure and compliance requirement for such securities shall take place in accordance with the following circular:

  1. CIR/IMD/DF1/60/2017 dated 19th June 2017
  2. SEBI/HO/DDHS/CIR/P/134/2019 dated 13th November 2019

However, with regard to the green debt security, it is pertinent to mention that the SEBI (Issue & Listing of Municipal Debt Security) Regulation 2015 does not define ‘Green Debt Security”. Therefore, the definition of it could be extracted from the Regulation 2(1) (q) of the SEBI (Issue & Listing of Non-Convertible Securities) Regulation 2021 (NCS Regulations). It defines green debt Security as debt security which is issued for raising funds for utilising it in regard to the projects or assets covered under the following categories:

  1. Renewable & Non–Renewable Energy including solar, wind, bioenergy and other fuel types which use clean technology.
  2. Clean transportation
  3. Sustainable water management, including Clean or drinking water and water recycling.
  4. Climate Change Adaptation
  5. Energy efficient projects, including efficient and green buildings.
  6. Sustainable waste management, including efficient disposal of wastage, waste to energy, and recycling.
  7. Sustainable use of land, including agriculture, afforestation, and forestry
  8. Conversation of Biodiversity
  9. Any project that the board may specify from time to time.

Further, chapter IX of the operational circular on “Issue & listing of Non-convertible Securities, Securitised Debt Instruments, Municipal Debt Securities, Security Receipts,and Commercial Paper” dated 10th August 2021 provides for the initial and disclosure requirements for entities issuing or proposed to issue green debt securities which shall be strictly adhered.

What Changes Are Brought Under The Circular?

As per the representations received from the market participants in regard to the compliances requirements for green debt securities, a need was felt by the issuer under ILMDS regulations willing to undertake the issuance of green debt securities but cannot do so because of the exclusion of similar provisions in the ILMDS regulations.

Henceforth, in order to resolute this issue, the present circular has mandated that an issuer under ILMDS regulation may issue green debt securities if it falls under the definition of Regualtin2(1)(q) of the NCS regulations. Such issuer shall also adhere to the provisions for NCS, in addition to the requirements laid down under the ILMDS regulations. regulations.

What Are The Instructions For Stock Exchanges Ad Depositories Under The Circular?

As per the present circular, the stock exchanges and depositories are directed to:

  1. Make relevant bye-laws, rules and regulations for the implementation of the provisions of this circular.
  2. Bring System Changes
  3. Publish the provisions of this circular on their website.
  4. Communication with the SEBI for the implementation of these circulars.
  5. Compliance monitoring of such issuance under the relevant provisions of NCS regulations.

When Will the Circular Become Effective?

The provisions of the present circular shall come into force from immediate effect.


The SEBI, in order to provide the broad application of the listing and issue of the green debt securities, has issued a current circular which inter alia provides the issuer under ILMDS regulation to deal in such securities. The issuer who is willing to undertake the activities of listing and issuing green debt security shall need to comply with the disclosure and compliance requirements under NCS regulations 2021[1]. The issue of a green debt security by the issuer under ILMDS regulations will provide an opportunity to raise funds more efficiently and effectively for numerous projects and further helps diversify those funds in many projects.


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