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June 19, 2021

SECP issues guidelines for green bonds issuance in Pakistan

 
June 19, 2021

ISLAMABAD: The Securities and Exchange commission of Pakistan (SECP) on Friday unveiled guidelines for corporate sector to raise funds from capital market to finance or refinance projects that contribute positively to the environment.

“All issuers who are eligible to issue debt securities, including sukuk either by way of public offer or private placement are eligible to issue green bonds while ensuring compliance with applicable regulatory framework,” the SECP said in a statement. “The issuance of green bonds will help in initiating sustainable projects for combating climate change besides facilitate issuers of debt securities to diversify their source of financing. It will also provide an additional financing instrument to those investors who are conscious of financing/re-financing projects that contribute to the environment.”

Proceeds of green bonds will be utilised to finance or refinance projects related to renewable and sustainable energy, energy efficiency, pollution prevention and control, biodiversity conservation, water management, and green buildings.

There is a growing trend of green bonds across the world, said the SECP, citing a research that says different countries have issued green bonds worth $1.2 trillion till date, including $297 billion last year and $130.9 billion till April this year.

At least 60 countries issued a total of 640 issues of green bonds, according to the International Capital Market Association’s database.

Under the guidelines, all issuers which are eligible to issue debt securities, either by way of public offer or private placement under the Companies Act, 2017 and with the Public Offering Regulations, 2017 and Private Placement of Securities Rules, 2017, and meeting the criteria for use of proceeds as given under these guidelines are eligible to issue green bonds.

The green bonds can be issued based on globally accepted standards such as the International Capital Market Association’s Green Bond Principles 2018, the Environmental Risk Management System and/or National/International environmental and social safeguards that are required to be complied by the issuer.

Eligible projects are expected to be mapped to the UN’s sustainable development goals.

“To qualify as a green bond, the proceeds must finance or refinance green projects or activities that bring energy efficiency, protect environment, utilize renewable energy, prevent and control pollution, use natural resources, projects related to land management, pollution free transportation, wastewater and water treatment,” said the SECP.

Under the guidelines, the minimum amount of application for subscription of sukuk/bond is Rs5,000. Applications for sukuk/bond below the aggregate face value of Rs5,000 will not be entertained.

Applications for sukuk/bond by the public, including institutions and individuals, must be for a minimum of the aggregate face value of Rs5,000. If the sukuk/bond to be issued to the public are sufficient for the purpose, all applications will be accommodated. If the issue is oversubscribed in terms of amount, then all applications shall be accommodated initially for sukuk/bond of face value of Rs5,000 each and the balance sukuk/bond will be allotted on prorata basis to all applicants who applied for sukuk/bond in multiples of Rs5,000.