SEBON’s new amendment paves way for issuing ‘green bonds’. What is a green bond?

The Securities Board of Nepal (SEBON) has revised its Initial Public Offering (IPO) regulations through the seventh amendment to the regulations on securities registration and issuance.

The revised regulation states that organised institutions can issue green bonds for environment-friendly projects, including sustainable development and climate change projects, where foreign investors can also invest.

A green bond is a fixed-income financial instrument that institutions use to mobilise capital for projects that have specific environmentally benefit objectives. Globally, green bonds are usually mobilised for financing renewable energy, energy efficiency, low-carbon transport, sustainable water, and waste and pollution-related projects.

This presents a significant opportunity for Nepal's underdeveloped bond market which is largely dominated by government debt securities and capital bonds issued by commercial banks. Meanwhile, Nepal has identified a financial gap of Rs 585 billion in achieving the Sustainable Development Goals by 2030.

Institutions such as universities (say Kathmandu University) and local governments (say Birgunj Metropolitan) can also raise green capital to finance their environment-related projects in the future given necessary laws and incentives are in place. Such projects can be in the areas of waste management, clean transportation, or green university infrastructure. 

All these projects can raise such capital by adhering to green bond principles.

Given the global commitment to transition towards a green and low-carbon economy and the shifting preferences of global investors, there exists significant potential for the green bond market, and likely to draw a more diverse range of issuers and investors.