On November 9, the government approved the Sovereign Green Bonds Framework, which essentially commits the government to the management and use of the proceeds of the bonds, in order to give comfort to international investors. It also speaks of maintaining a ‘green register’ and annual reporting of projects.

The framework is a step towards promoting green financing. CICERO, an independent Norway-based second-party opinion (SPO) provider, was appointed to evaluate the framework and certify its alignment with International Capital Market Association’s green bond principles and international best practices. CICERO has rated it ‘medium green’ with a ‘good’ governance score.

Some legal experts have observed that this framework is better than the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, because the framework says the redemption of the principal amount and payment of interest are not conditional on the performance of the eligible project.

This would “provide comfort to investors against any project-related risks, incentivising investor participation in green bonds”, according to an article in Mondaq by lawyers from Khaitan & Co LLP, a law firm.

However, they point to certain “grey areas” in the framework that “demand legislative intervention”.

The writers — Manisha Shroff, Suhana Islam Murshedd, Paridhi Rasiwasia, Saranya Karanath, and Rishabh Kumar — point out that the framework does not specify quantitative thresholds for project categories.

For instance, no benchmark or minimum certification has been provided for construction of low-carbon buildings.

“Similarly, there is no reference to any recognised sustainability standard and/or certification for evaluation and selection of green projects eligible for green expenditure,” the article says.