IFSCA unveils framework for ESG-linked transition bonds at GIFT City
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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com .)
The International Financial Services Centres Authority has issued a framework that will enable companies that face difficulty in reducing carbon emissions to raise funds at Gift City through Environment, Social and Governance (ESG)-linked bonds.The unified regulator issued Tuesday a framework for issuance and listing of the so-called transitions bonds. 'The said framework will enable the issuers, specifically from hard-to-abate sectors , to raise capital and list their securities at GIFT IFSC, while committing to a credible transition plan and making enhanced disclosures to ensure the interests of the investors are protected,' it said.Industries such as steel, cement, aviation are classified as hard-to-abate. Companies from these sectors particularly find it difficult to reduce carbon emission because of their heavy reliance on fossil fuels and processes that make decarbonization difficult.ISFCA noted that ESG-labelled debt securities have played a key role in mobilizing climate finance . But it is generally seen that their application is often limited to sectors/projects that are at near/net zero. 'Transition finance provides a structured pathway for hard-to-abate industries to reduce their emissions progressively,' it said.The framework has four important pillars. These are a credible transition plan at the entity level, alignment with globally recognized taxonomies and technology roadmaps, mechanism for independent external review, and disclosure requirements.Last week, infrastructure conglomerate Larsen & Toubro raised ESG-compliant bonds amounting to Rs500 crore for a term of three years. This is the first such bond issue under the Securities and Exchange of India's (Sebi) newly issued framework on ESG and sustainability-linked bonds
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