Green and social bonds to be issued based on national principles of sustainable development
The Bank of Russia has prepared amendments to securities issuance standards.
The green bond issue regulation will factor in the first national taxonomy of green projects and the national verification of sustainable financial instruments, currently being approved by the Russian Government. The corresponding draft Bank of Russia’s regulation has been released to assess regulatory impact.
According to the standards of issuance currently in place, Russian green bonds must comply with international principles and standards in the field of ecology and sustainable financing, such as the International Capital Market Association principles or the Green Bond Principles. Proposed amendments will also allow issuers to mark their bonds as green if they are aimed at financing projects which are green according to the Russian taxonomy.
The national verification system will make it possible to liberalise the terms of issuance for green and social bonds. Now, issuers will have the right to independently specify the consequences of inappropriate use of raised investment in the prospectus. The right to demand a buyback or early redemption of bonds is no longer mandatory. By inserting corresponding provisions in their funds management procedure, issuers will be able to use funds received from the placement of bonds before allocating them to finance green projects.
Amendments to the standards of issuance are also aimed at their alignment with international approaches to the definition of sustainable development bonds, for example, where no specific project has been selected before the issuance, in addition to checking a specific project, the scope of verification should also include the issuer’s policy with its approaches to selecting projects for financing.
The prepared amendments allow issuers to label bonds as sustainable development bonds in the issuance decision and prospectus. Such bonds can be issued in case of the targeted allocation of attracted funds both to green and social projects in case the requirements for green and social bonds are complied with.