SECP issues guidelines for green bonds to attract investment

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has notified guidelines for the issuance of green bonds and sukuk to contribute positively towards the protection of environment, combat climate change and promote green finance, a statement said on Friday.

“The guidelines, describing the procedure for issuing green instruments, would also facilitate the issuers of debt securities to diversify their source of financing and provide an additional financial instrument to dedicated investors in the form of ‘green bonds’ specifically aimed to finance or refinance projects that contribute positively to the environment.”

In addition, “[the] investors and other market participants can also rely on these guidelines for developing better understanding of green bonds and their relevance for sustainable finance approaches,” the commission said.

To qualify as a green bond, the proceeds must finance or refinance green projects or activities that bring energy efficiency, protects environment, utilises renewable energy extracted by renewable resources – such as sunlight, wind, waves, heat, etc, prevents and control pollution, uses natural resources, projects related to the land management, clean/pollution free transportation, wastewater and water treatment, etc.

The commission proceeds of green bonds will be utilised to finance or refinance such projects that would contribute towards Pakistan’s environmental priorities in renewable and sustainable energy; energy efficiency; pollution prevention and control – including reduction of air emissions, greenhouse gas control, and soil remediation, waste-recycling and waste to energy.

The green financing opportunities would attract investment in the environmentally sustainable management of living natural resources and land use, including environmentally sustainable agriculture; environmentally sustainable animal husbandry; climate smart farm inputs such as biological crop protection or drip-irrigation; environmentally sustainable fishery and aquaculture; environmentally-sustainable forestry, including afforestation or reforestation, and preservation or restoration of natural landscapes.

Terrestrial and aquatic biodiversity conservation projects, including the protection of coastal, marine and watershed environments; clean and environment-friendly transportation, including mass/public transportation projects are also eligible for green financing.

According to the SECP, the proceeds from green bonds will also be utilised for sustainable water management, wastewater management, sustainable urban drainage systems and river training and other forms of flooding mitigation; climate change adaptation, including information support systems, such as climate observation and early warning systems; eco-efficient and circular economy adapted products and green buildings, which meet regional, national or internationally recognised standards or certifications.

The eligible projects are expected to be mapped to the UN’s Sustainable Development Goals, it added.

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