By:Staff WriterColombo (LNW): Making Sri Lanka’s long delayed ambitious forex raising endeavour a reality, the Colombo Stock Exchange (CSE) has introduced the initiative of listing and trading of Green Bonds for the first time in the Sri Lankan stock market, with effect from 25th April 2023.
Under the Green Bonds concept, proceeds are invested exclusively in green projects that generate climate or other environmental benefits.
Among these projects are renewable energy, energy efficiency, sustainable waste management, sustainable land use (forestry and agriculture), biodiversity, clean transportation, and clean water.
The Government was planning to issue green bonds in July 2022 in order to raise US $ 2 billion under forex raising initiative of former CB Governor Ajith Nivard Cabraal prior to the declaration of preemptive debt default by present Governor Nandalal Weerasinghe on 12 April 2022, official and media reports revealed.
This plan to issue $ 2 billion in green bonds around July 2022 had been in the pipeline, but was postponed following the sudden decalation of preemptive debt default but its still on the cards
Green bonds are fixed-income Government securities issued under the promise of using the capital raised to wholly or partly finance projects and activities promoting a broad range of environmental objective
During Mr Cabraal’s tenure as CB Governor Sri Lanka had been seeking to issue $ 1 billion worth of green bonds in July 2022 and another $ 1 billion in September 2022.
This was part of over $ 10 billion in inflows targeted during 2022, not inclusive of the inflows targeted under the previous six-month plan, which largely failed to materialize following debt default.
According to the CSE statement, the objective of enabling regulations for the issue of green bonds in the Sri Lankan stock market is to facilitate Sri Lankan corporates to raise capital.
It will be used for green projects and to foster greater transparency and accountability in the use of proceeds from the Green Bond, and to ensure reporting of the impact of the green projects for which the proceeds of the bond was used.
The Green Bonds will have the same features of a Corporate Debenture and will be listed on the Debt Market segment of the CSE.
The main difference between a Corporate Debenture and a Green Bond is the usage of the proceeds.
In a Green Bond, the proceeds have to be exclusively used for financing or refinancing in part or in full, new or existing eligible green projects which are aligned with at least one international Green Bond standard set out above.
The Green Bonds will be traded on the Automated Trading System (ATS), similar to Corporate Debentures. The trading parameters currently applicable to Corporate Debentures will also apply to Green Bonds as well, CSE officials said.
The potential issuers of Green Bonds are any public company incorporated under the Companies Act and any statutory body established/incorporated under a statute.