Sovereign Green Bonds framework and ICAI

Sovereign Green Bonds framework and ICAI

Subject: Economy

Context:

CA Institute has finalised the assurance standard on sustainability related information which will enable auditors to express an opinion on sustainability related aspects such as green bonds.

Details:

The resources mobilised by the government through sovereign green bonds will form part of the Centre’s overall market borrowings in 2022-23.

What- Sovereign Green Bond?

• A sovereign green bond is a debt instrument issued by the Central or State government to borrow money from investors with the commitment that the mobilised fund will be spent on climate or ecosystem related activities.

Sovereign Green Bonds framework of India:

• Sovereign Green Bonds will be issued for mobilising resources for green projects.
• CICERO, an independent and globally renowned Norway-based second party opinion provider, was appointed to evaluate India’s green bonds framework and certify alignment of the framework with international best practices.
• CICERO has rated India’s Green Bonds Framework as
  • ‘Medium Green’ with a –”Good” governance score.
• The payment of principal and interest on the Green Bonds will not depend on the performance of the eligible projects.
• Green Finance Working Committee (GFWC) wil be constituted to validate key decisions on the issuance of sovereign green bonds.
• The projects eligible to be financed or re-financed by the proceeds of Green Bond issuances fall under the following nine categories:  renewable energy, energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management, pollution prevention and control, green buildings, sustainable management of living natural resources and land use, and terrestrial and aquatic biodiversity conservation.
  • Green expenditure can be in the form of equity only in the case of metro projects under the ‘Clean Transportation’ category.
  • Expenditures directly related to fossil fuel are excluded.
  • The Compressed Natural Gas (CNG) is allowed as an ‘eligible expenditure’ but only when it is used in public transportation projects i.e. subsidy/incentive for private transportation using CNG is excluded.
  • Other excluded projects include hydropower plants larger than 25 MW, Nuclear power generation, direct waste incineration, alcohol, weapons, tobacco, gaming, palm oil industries, renewable energy projects generating energy from biomass using feedstock originating from protected areas, and landfill projects.
• All eligible Green Expenditures will include public expenditure undertaken by the Government in the form of investment, subsidies, grant-in-aids, or tax foregone (or a combination of all or some of these) or select operational expenditures, R&D expenditures in public sector projects that help in reducing the carbon intensity of the economy and enable country to meet its Sustainable Development Goals (SDGs).
• It will be endeavored that all the proceeds get allocated to projects within 24 months following issuance.

The Institute of Chartered Accountants of India

• The Institute of Chartered Accountants of India (ICAI) is a statutory body established by the Chartered Accountants Act, 1949 
• It aims to regulate the profession of Chartered Accountancy in the country.
• The Institute, functions under the administrative control of the Ministry of Corporate Affairs, Government of India. 
• The ICAI is the second largest professional body of Chartered Accountants in the world, with a strong tradition of service to the Indian economy in public interest.
• The affairs of the ICAI are managed by a Council in accordance with the provisions of the Chartered Accountants Act, 1949 and the Chartered Accountants Regulations, 1988.
• The Council consists of 40 members of whom 32 are elected by the Chartered Accountants and remaining 8 are nominated by the Central Government generally representing the Comptroller and Auditor General of India, Securities and Exchange Board of India, Ministry of Corporate Affairs, Ministry of Finance and other stakeholders.
• Functions:
  • Regulate the profession of Accountancy
  • Education and Examination of Chartered Accountancy Course
  • Continuing Professional Education of Members
  • Conducting Post Qualification Courses
  • Formulation of Accounting Standards
  • Prescription of Standard Auditing Procedures
  • Laying down Ethical Standards
  • Monitoring Quality through Peer Review
  • Ensuring Standards of performance of Members
  • Exercise Disciplinary Jurisdiction
  • Financial Reporting Review
  • Input on Policy matters to Government