The National Stock Exchanges (NSE’s) index services subsidiary, the NSE Indices Limited on February 27, 2023 launched India’s first ever sovereign green bond indices.
These indices, namely, Nifty India Sovereign Green Bond Jan 2028 Index and Nifty India Sovereign Green Bond Jan 2033 Index, follow the target maturity date structure.
According to a press statement, the Nifty India Sovereign Green Bond Jan 2028 Index has a maturity date of January 31, 2028. It includes Government securities (G-Secs) issued under the category of sovereign green bonds (SGrBs) maturing during the six-month period ending January 31, 2028.
Elsewhere, the Nifty India Sovereign Green Bond Jan 2033 Index has a maturity date of January 31, 2033. It includes G-Secs issued under the category of SGrBs maturing during the 12-month period ending January 31, 2033.
Mukesh Agarwal, CEO, NSE Indices, said in a statement: “The Nifty India Sovereign Green Bond indices are the first of its kind, as they seek to capture the performance of Indian sovereign green bonds that finance green infrastructure. The two indices follow target maturity date structure maturing in 2028 and 2033. As per Government of India (GoI), the proceeds from sovereign green bonds will be deployed in public sector projects which will help in reducing the carbon intensity of the economy.”
He added: “These indices are expected to act as a benchmark for asset managers and be a reference index tracked by passive funds in form of exchange-traded funds (ETFs), index funds and structured products, which can provide fixed income investors efficient and cost-effective access to the Indian sovereign green bond market while making a positive impact on the society.”
Both indices have base date of January 27, 2023, and a base value of 1,000. The indices will be reviewed monthly.
Of late, green and blue bonds have caught the fancy of investors and the market.
In this regard, the Securities and Exchange Board of India (Sebi) had also come out with a circular on February 3, 2023, outlining the criteria that issuers of green debt securities should follow to avoid greenwashing.
The term greenwashing refers to falsely claiming that a company’s products, services, or business operations are more environmentally-friendly than they actually are. Companies which engage in ‘greenwashing’, mislead the market participants who buy these securities.
Sebi broadly defines a green debt security as one that is issued for the purpose of raising capital to be used for the cause of sustainable development or furthering energy efficiency.
Sebi said in the circular that an issuer of green bonds shall not use misleading labels, hide trade-offs, or, cherry pick data from research to highlight green practices, while obscuring others that are unfavourable. It also asked issuers to ensure that they continuously monitor the transition to a more sustainable form of operation.
Sebi further told issuers that if they notice capital raised from green bonds is being invested outside of the above-mentioned asset classes, they should inform investors and allow for early redemptions if majority of investors demand it.
According to data from Sebi, under the Sebi framework for green bonds, 14 issuers have raised Rs. 4,539 crore as on June 30, 2022. Indian companies raised nearly $7 billion through ESG and green bonds in 2021, compared to $1.4 billion and $4 billion in 2020 and 2019, respectively.
According to Sebi’s consultation paper, most of the green bonds issued by Indian issuers are listed on offshore exchanges.