In her 2022 Budget Speech, the Finance Minister of India stated that India will be making an issuance of Sovereign Green Bonds (“SGBs”)within the current fiscal year. Currently, the Reserve Bank of India and the Central Government are working on a draft framework for the issuance of the said SGBs. It is also to be notedthat guidelines regarding such an issuance will also be released.

It is in the above background that the present post seeks to analyse howIndia’s status-quo framework for the issuance of green bonds can be improved upon in order to implement the issuance of SGBs by the Indian Government. This Post attempts to undertake a comparative analysis of the Indian Green Bond Framework with the SGB frameworks of the developing countries that have recently issued SGBs namely – i) Fiji; ii) Chile; iii) Nigeria; iv) Colombia; v) Indonesia; vi) Japan; and vii) Benin. This has been done with the aim of recording the good practices from these jurisdictions that may fill the missing gaps in India’s legislation, based on the four core components of the Green Bond Principles established by the International Capital Markets Association (“ICMA”).

At the outset, it is important to note that the legal frameworks for the issuance of SGBs/green bonds in a sizeable number of jurisdictions are based on theGreen Bond Principles (“GBPs”) (Voluntary Processing Guidelines for Issuing Green Bonds) issued by the ICMA. The GBPs comprise the following essential components: (a) Use of Proceeds; (b) Process for Project Evaluation and Selection; (c) Management of proceeds and (d) Reporting.

A Critical and Comparative Analysis with Foreign Jurisdictions: How can India do Better? (Especially in Light of the Issuance of SGBs in Developing Countries)

A. Use of Proceeds

i) Defining Eligible Green Projects (“EGPs”): The current Indian framework for the issuance of green bonds defines green debt securities within 8 broad categories, as provided in Regulation 2(q) of theSEBI NCS Regulations of 2021. However, no clear explanation has been given as to what type of projects/programs a particular category would constitute. Further, the examples present in the Regulation to show what is included in a particular category do not provide an adequate level of guidance. Lastly, the Regulation only lays down positive measures as to the categories under which green bond issuance can be made. However, there is a complete lack of exclusion in the form of negative measures that define what cannot be done under the guise of greenwashing. As such, it is recommended that India take note of the following good practices being followed in the Green Bond Frameworks of foreign jurisdictions:

  • The Green Bond Framework of the Republic of Chile defines EGPs as those that fall within one of its defined Green Sectors. These Green Sectors include: a) Clean Transportation, b) Energy Efficiency, c) Renewable Energy, d) Living Natural Resources, Land Use and Marine Protected Areas, e) Water Management and d) Green Buildings. Now, these sectors are more or less similar to the Indian categories.

However, Chile has taken a step further to i) broadly define the objectives of projects undertaken in each particular sector as well as the eligible expenditures that the Government has the power to undertake for carrying out projects in the respective sector; (ii) to give examples of the environmental benefits that the EGPs should seek to fulfill and their contribution towards meeting the country’s Sustainable Development Goals. For instance:

Green Sector

Eligible Green Expenditures

Environmental Benefits

SDGs Contribution

Clean Transportation

Objective: Promote public transportation and support multimodal transport solutions. 

Green Eligible Expenditures include: 

♦Investment in public infrastructure and assets enhancing modal shift, electric public passenger transport:

◌ electrified metro lines: new lines, extension and renovation;

◌ electric buses, charging stations for electric vehicles;

◌ other public transportation like tramways and trains;

◌ intermodal infrastructure to connect different clean public transportation, system monitoring and control, passenger safety and security infrastructure and bicycle paths and parking. 

♦Subsidies or incentives to promote public transportation.

  • Climate change mitigation
  • Air quality improvement
  • Greenhouse gas reduction through the promotion of low carbon means of transportation.
  • SDG No.3: Good Health and Well Being.
  • SDG No. 11: Sustainable Cities and Communities
  • SDG No. 13: Climate Action.



  • Following a similar practice, theNigerian Green Bond Framework, 2017 provides that all the EGPs must fall into one of its defined eligible sectors. It has formulated a comprehensive method by way of which: (i) each eligible sector is characterised on the basis of two broad themes, i.e., climate change mitigation and adaptation, (ii) the relevant sector is related to the Equivalent Non-Determinable Contribution Targets of Nigeria, and (iii) it provides examples of the types of projects that can be undertaken in each specific sector. For example:


Equivalent NDC Target

Project Type

Climate Change Mitigation – Energy Efficiency

  • 2% per year energy efficiency (30 % by 2030)
  • Efficient gas generators

Investments in equipment, systems and services which result in more efficient use of energy.

  • Interestingly, theGreen Bond Framework of Indonesia is the only one that includes Green Tourism as one of the sectors in which EGPs can be carried out explicitly. This would include: (i) developing new tourism areas in line with Green Tourism Principles, (ii) the optimisation of supporting infrastructure to support sustainable tourism (i.e. water treatment, energy efficiency), as well as (iii) developing tourism resiliency against climate change risk.
  • TheSDG Bond Issuance Framework of Benin has taken it a step further and added the practice of identifying and mentioning the target population that will be benefited from the use of SGB proceeds for the particular EGPs. For example:

Categories of Eligible Expenditures

Target Population

Access to low-carbon, reliable and affordable energy.

Entire Beninese population, but in particular the habitants who live in the countryside who are poorly connected to the conventional electricity grid (in the North of Benin, mostly)

Necessity for Negative Measures in the Form of Explicit Inclusions: 

  • The frameworks of Chile, Indonesia, Benin and Colombia have inculcated negative measures wherein they explicitly define what cannot form part of an EGP. This becomes immensely significant because the lack of such exclusions could potentially lead to a situation similar to what China faced in the past, with the inclusion of “clean coal” projects in green projects, which is counterintuitive to the very raison d’être of such green bonds. For example:


Exclusions Provided for


  • Exploration and production of fossil fuels;
  • Burning of fossil fuels as a unique source of power generation or hybrid plants with a fossil related back up higher than 15%;
  • Construction of rail infrastructure dedicated to the transportation of fossil fuels;
  • Generation of Nuclear power;
  • Electricity transmission infrastructure and electricity systems where an average of 25% or more is fossil-fuel-generated;
  • Alcohol, weapons, tobacco, gaming, or palm oil industries;
  • Production or trade in any product or activity deemed illegal under national laws or regulations or international conventions and agreements;
  • Deforestation, degradation of forests.

For the avoidance of doubt, in any case, the Eligible Green Projects shall exclude the below:

  • New fossil fuel-based electric power generation capacity and expenditure related to the improvement in the efficiency of fossil fuel-based electric power generation;
  • Large scale hydropower plants (>30 MW capacity);
  • Nuclear and nuclear-related assets.

ii) Defining Eligible Green Expenditures (“EGEs”): EGEs are expenditures on EGPs from the proceeds of the issuance of the SGBs. The Regulations under Chapter IX of the SEBI Operational Circular make no mention of EGEs. However, it is important to define them so that the proceeds of the green bond are used for proper purposes, and no unnecessary expenditures are incurred by the Government and its instrumentalities under the guise of allocating them towards EGPs. 

TheFiji Framework defines EGEs to include: (i) investment expenditures; (ii) operational expenditures; (iii) tax exemptions and tax credit; (iv) guarantee schemes, and (v) subsidies. It further states that: (i) expenditures to be directed to government departments, State agencies, local authorities and civil society organisations, businesses & households or (ii) relate to tangible assets such as land, power plants and other infrastructure as well as supporting related expenses such as Research and Development.

TheChilean framework defines EGEs to include: (i) tax expenditures (subsidies and tax exemptions); (ii) operational expenditures (funding for State agencies, local authorities, companies’ instrumental in deploying the country’s climate and environmental strategy); (iii) Investments in real assets (land, energy efficiency, infrastructure etc.) and maintenance costs for public infrastructure; (iv) intangible assets (research and innovation, human capital and organisation), and (v) capital transfers to public or private entities. 

iii) Use of Proceeds for Financing as well as Refinancing: Although Regulation 1.4 of the SEBI Circular provides for the refinancing of EGPs, it does not go into any details. The other jurisdictions have delved into this aspect in the following ways:

  • Avoiding the problem of double counting: The Fijian framework addresses that one may not finance any portion of an EGP that already has a dedicated revenue source funding it. This helps in avoiding the problem of double counting.
  • Looking Back Period for Re-Financed EGPs: The Fijian Framework also mandates a look-back period of two years for the refinanced EGPs.
  • Disclosing Proportion of Proceeds Being Used for Financing v. Refinancing: The Fijian Framework provides that if all or a proportion of the proceeds are being used for refinancing, then the issuer has to provide an estimate of the share of proceeds being used for financing v. refinancing. 

iv) Compliance with International Climate Change Taxonomy/National Green Taxonomy

  • The lack of defined standards and taxonomy is a major problem. India needs a coherent and comprehensive taxonomy along with definitions to help remove inconsistencies in the interpretation of what constitutes a “green bond”. Proper standards can also help in enhancing the comparability of the bonds.
  • The Chilean framework provides that their green sectors must comply with theInternational Climate Bonds Taxonomy and, where feasible, meet the eligibility criteria under theClimate Bonds Standard. Further, where there exist local taxonomies or certifications to determine whether an asset is low-carbon and climate-resilient, they may also be taken into account. 

v) Prescription of Timeline for Allocation of Bond Proceeds: The Framework of Benin provides that the entire amount of proceeds raised in each issuance of SGBs shall be allocated to the EGEs in the EGPs within 2 calendar years from the issue date. Further, if a particular EGE becomes ineligible, it must be replaced with another within a minimum of 3 months and a maximum of 12 months.

B. Process for Project Evaluation and Selection

Regulations 1.2 to 1.4 of the SEBI Operational Circular provide brief details about the process to be followed for deciding project eligibility, deploying the tracking of funds, and even disclosure with respect to the projects in which the proceeds are being used. However, it is to be noted that the Circular lays down the law for corporate green bond issuances and not Sovereign Green Bonds. Since India does not have a dedicated Framework for SGBs yet, it is important to refer to how foreign governments have laid down the process for project evaluation and the selection of SGBs. In most jurisdictions, representatives of the Government (within the Ministry of Finance/Economy/Environment etc.) have been made responsible for determining the process, criteria as well as overseeing implementation as follows:

Constitution of a Green Bond Committee:

The Fijian framework has established a Green Bond Steering Committee consisting of regulators, environmental experts as well as representatives from the Ministry of Economy to oversee the Green Bond implementation and allocation process. Projects will be identified by the Director of Climate Change along with the Governor of the Reserve Bank and recommended to the Committee by the Director of Climate Change considering: (i) the EGPs in the Framework and Fiji’s climate change and environment policy; (ii) Government’s budget commitments; (iii) projected timeline of investment and its fit with the GB scheme and (iv) capacity to provide reporting. While the Committee will endorse the EGPs, the ultimate responsibility for determining the list of EGPs lies with the Ministry of Economy.

The Chilean framework has established a Green Bond Committee, comprising representatives of the main ministries, overseeing the full implementation of the framework. Further, the Ministry of Finance (“MOF”) and Environment will be responsible for: (i) reviewing and validating the selection of EGPs; (ii) monitoring resource allocation; and (iii) coordinating the preparation of Reports for the investors.

The Indonesian framework puts the responsibility on the MoF along with the National Development Planning Agency to review and approve the EGPs/EGEs to be included in the State Budget.

The Colombian framework establishes a Sovereign Green Bond Working Group, which will be responsible for: (i) reviewing and verifying the EGEs; (ii) ensuring that the amount allocated to EGEs is equivalent to net proceeds of issuance and (iii) preparing post-issuance reports.

C. Management of Proceeds

Although Regulation 1.3 of the SEBI Circular provides for tracking the deployment of funds from the green bond issuance, the Indian framework does not contain a robust mechanism for the management of the proceeds received from the issuance of the green bonds.

i) Investor’s Do Not Bear the Risk of Project Performance: Almost all of the jurisdictions with an SGB Issuance Framework provide that investors do not bear any project related-risks, and the payments of principal and interest will be made irrespective of the selection and performance of the EGPs.

ii) Full and Partial Eligibility: There might be certain cases wherein only a component of the project is eligible for financing through the proceeds of the SGB. In such cases, a distinction shall be made between the total amount required to finance the project, and only that component eligible for green financing should be reported as eligible.

iii) Government to Track the EGEs: The Chilean Framework states that the tracking will be done in order to ensure that an amount at least equal to the net proceeds from completed issuances is allocated to financing and refinancing the EGEs. It will also track projects that were included initially but are no longer complying with the eligibility criteria due to changes in their nature/implementation so that their specific amount is not recorded in the EGEs related to the specific bond.

iv) Green Bond Allocation Register: The Indonesian Framework has introduced the idea of a Green Bond Allocation Register for recording the allocation of each SGB. It will include information including the details of each SGB- ISIN, pricing date, maturity date etc; the list of EGPs with information about the summary of project details, the amount of proceeds allocated to each EGP, the expected climate and environmental impacts of the EGPs, the remaining balance of unallocated proceeds, and other necessary information.

v) EGP Value Always Higher then Amount of Issuance: The Frameworks of a few jurisdictions emphasise on the fact that the total value of the EGPs and the EGEs related to a specific bond will always be higher than the amount of issuance in order to avoid the necessity of including new projects in case certain projects become ineligible. The Government may also raise funds in tranches in order to minimise debt obligations and match the EGP allocations.

D. Reporting

Regulation 2 of the SEBI Circular does provide for any additional disclosures to be made by the Issuer in its annual reports and financial results – including utilisation of the proceeds of the issue determined by its internal process and subject to verification by an external auditor, details of unutilised proceeds, a brief description of projects to which amounts have been dispersed and qualitative as well as quantitative performance indicators. Although India has taken the right direction in mandating these significant reporting requirements, there is much more needed to be done to enhance transparency and subsequently increasing investor confidence in the SGBs. The following are a few good practices from foreign jurisdictions that can be adopted by India to enhance the credibility of its SGBs:

i) Allocation Report:

The Chilean Government follows the idea of Allocation and Impact Reporting. While the Impact Reporting provisions are similar to those of SEBI’s Regulation 2, it provides some useful guidance in terms of Allocation Reporting to be done until the full allocation of funds is completed. This will include: (i) percentage of proceeds allocated for financing and refinancing; (ii) percentage of proceeds allocated per EGP; as well as (iii) percentage of co-financing per EGP (Eg: projects co-financed with international lenders).

The Benin Government has mandated a significant point to be included in its Allocation Report – a summary of eligible categories and an indication as to which categories have benefited from the funding (Allocation Breakdown).

ii) Impact Report:

The Fijian Government has introduced a very important idea of “Impact Reporting” whereby anImpact Report would be created to illustrate the expected climate results made possible as a result of the SGB issuance.

Further, the framework has provided the indicative outcome and impact metrics in order to guide the Reporting process. For example:

Output Indicator

Impact Indicator

Monitoring of air quality indices, status of waterway network

Avoid green-house gas emissions, improvement in air quality

  • It also provides for the frequency at which reporting should take place. The following guidelienes have to be complied with: (i) monitoring reports are to be issued annually until all bond proceeds have been allocated; (ii) output indicators are to be disclosed on an annual basis, and (iii) the disclosure of impact indicators is to be determined on the basis of the sector until the maturity of the bond.
  • The Chilean Government has made use of diagrams and figures in their framework to explain the entire Impact Reporting process. This has also been carried out byJapan’s Green Bond Guidelines, extensively throughout the document. This is an extremely useful endeavor.
  • The Benin Government has introduced the idea of mapping the effects of the EGPs on beneficiaries and providing details about such beneficiaries in its Impact Reporting.

iii) External Review:

More stringent external review requirements in the Indian framework could help increase the legitimacy of these instruments. It could also help mitigate the common problem of “greenwashing”.

  • Second Party Opinion: Companies such as KPMG, Viego and Sustainalytics can perform second-party review of the Indian framework. For example, Fiji has employed Sustainalytics to provide a second party opinion on its framework.
  • Independent Third-Party Review: Making the documents of the independent review by the report of the external auditor available on the Government’s website. Fiji has also mandated an independent review of the functioning of its Green Bond Committee.
  • External Certification: In its framework, Chile has mentioned that it reserves the right to request the certification of its green bonds by the International Climate Bonds Standard.

iv) Other measures:

The Fijian framework mandates that the Reserve Bank will make a page on its website to enable investors to follow the implementation of the framework. It will provide: (i) key information about the framework, including project selection criteria; (ii) progress status reports, and (iii) monitoring of compliance with governance, environmental and social aspects.

Further, an annual online newsletter will be created by the Fijian Government in collaboration with its Reserve Bank to inform investors about the environmental impacts of the projects delivered.

The Benin Government has entered into a partnership with the Sustainable Development Solutions Network, which will furnish an in-depth analysis of Benin’s progress in the achievement of its SDGs through the issuance of these bonds. 

E. Miscellaneous

i) Addressing Environmental and Social Risks: The Fijian Framework addresses the fact that the green bond proceeds may be allocated to projects that may also have associated negative environmental and/or social impacts, including the disruption of ecosystems due to land-use change or development, air pollution and water pollution. In this context, it provides that positive impacts should outweigh the negatives for each project, further clarifying that there is a general expectation that projects would not increase fossil fuel usage and production of harmful emissions.

ii) Mitigating Risks of Green-washing: Japan’s Green Bond Guidelines of 2017 are the only ones explicitly addressing that their guidelines should prevent green wash bonds. India could also potentially adopt this practice to clarify the law on this question.

iii) Compliance with Environmental Laws of the Country: The Fijian Framework explicitly provides that to avoid any adverse impact on the environment and the nation’s people, all the EGPs should be carried out in strict compliance with the environmental laws of the country. As such, the Indian framework may also insert this clause to seek compliance with the provisions of the Environment Protection Act of 1986, Environmental Impact Assessment Notification of 2006, the Air (Prevention and Control of Pollution) Act, 1981 and the Water (Prevention and Control of Pollution) Act, 1974, to name a few.

Concluding Remarks

It is evident that India has a long way to go in the development of its regulatory framework for Sovereign Green Bonds. The primary basis for this framework must be the absolute minimisation of risks of greenwashing in a country with significant corporate governance concerns, even in governmental bodies. The above-mentioned good practices will enable India to become a part of the standardised international practices of issuance of SGBs, thereby providing a good basis for comparability of progress vis-à-vis other nations, as well as in minimising greenwashing through advanced disclosure and reporting requirements at every stage of the issuance, allocation, utilisation and post utilisation process, ex-ante regulations for management of proceeds, and most importantly, in defining green projects to meet the necessary intents and purposes.

About the Author 

Ms. Aastha Bhandari is a 4th year law student at Jindal Global Law School, Sonipat. 

Editorial Team 

Managing Editor: Naman Anand 

Editors-in-Chief: Jhalak Srivastav and Muskaan Singh 

Senior Editor: Hamna Viriyam 

Associate Editor: Harshita Tyagi

Junior Editor: Ria Goyal

Preferred Method of Citation  

Aastha Bhandari, “Conceptualising a Legal Framework for the Issuance of Sovereign Green Bonds in India: A Critical and Comparative Analysis” (IJPIEL, 21 June 2022) 


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