BSEC moves to expand debt securities rules, introduces new sustainable finance bonds
Under the proposed changes, green bonds will be more clearly defined in line with internationally accepted standards, and these instruments will be used to finance renewable energy, clean transportation, biodiversity conservation, climate change adaptation, and other green projects
Highlights:
- BSEC proposes amendments to Debt Securities Rules, 2021.
- Introduces green, social, gender, orange, and sustainability bonds.
- Aims to fund environmentally and socially responsible projects.
- Draft open for public feedback until 8 October.
- Issuers must ensure transparency, reporting, and external reviews.
- Consent fees for sustainable bonds reduced to 0.03% to attract investment.
The Bangladesh Securities and Exchange Commission (BSEC) has proposed major amendments to the Debt Securities Rules, 2021, aiming to broaden the country's sustainable finance framework and introduce new classes of bonds.
The draft guideline has already been published on the regulator's website for public consultation, which will remain open until 8 October. The proposed rules also set out reporting, monitoring, and disclosure requirements for bond issuers.
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The amendments introduce several thematic bonds, such as gender bonds, orange bonds, sustainability bonds, and updated provisions for green and social bonds, to attract investment into projects that promote environmental sustainability, gender equality, and social development.
According to the regulator, the changes will help attract foreign investment, support SDG achievement, and create innovative tools for responsible fundraising.
Under the proposed changes, green bonds will be more clearly defined in line with internationally accepted standards. These instruments will be used to finance renewable energy, clean transportation, biodiversity conservation, climate change adaptation, and other green projects.
BSEC also introduced the concept of "green projects", listing eligible categories such as renewable energy, sustainable water and waste management, eco-efficient products, and green buildings. These projects must show measurable climate or environmental benefits, with verification from qualified experts.
New classes of bonds
As per the draft, the new additions are gender, orange and sustainability bonds.
A gender bond, according to the draft, is a type of social bond where proceeds finance projects that promote gender equality and women's empowerment.
Meanwhile, an orange bond is defined as a financing tool focused not only on women's empowerment but also on advancing inclusion of marginalised communities, with a broader connection to climate, social, and sustainability goals.
The draft also introduces sustainability bonds, which combine features of green and social bonds. These can be used to fund projects that provide both environmental and social benefits.
In addition, social bonds and social projects received an expanded definition.
Eligible projects include affordable housing, health and education services, employment generation through SME financing, and food security initiatives. These projects must deliver measurable social benefits to underserved populations, such as women, migrants, the unemployed, and communities vulnerable to climate change, according to the draft.
BSEC's objective
Abul Kalam, director and spokesperson of BSEC, said, "We have added new guidelines under the debt securities law for issuing sustainable bonds. The main objective is to build a sustainable economy in Bangladesh and contribute effectively to the UN Sustainable Development Goals (SDGs)."
"Currently, international investors, especially institutions like the World Bank and the Asian Development Bank (ADB), are highly interested in sustainable projects. In many cases, investors stipulate that projects must be sustainable; otherwise, they will not invest," he said.
"In response, BSEC aims to establish a Sustainable Financing Window for the future. By including new bonds and instruments in this platform, it will serve as a strong tool for building Bangladesh's sustainable economy. This initiative will not only promote environmentally and socially responsible investment but also attract foreign investment and align the country's financial market with global sustainable finance standards," he added.
Fund usage and management
The draft also emphasises transparency and reporting, requiring issuers to disclose how proceeds are used, the selection criteria for projects, and the expected social and environmental impacts.
"The issuer shall disclose the categories of eligible projects to which the proceeds shall be allocated," the notification states. It also requires annual reporting and independent external review to authenticate the use of funds.
To protect investors, the proposed amendments mandate that proceeds from sustainable bonds be placed in escrow or specified bank accounts. Any change in utilisation of funds would require prior approval from the BSEC, supported by board resolutions and trustee consent.
Issuers must also publish external reviews of project evaluation processes, appoint independent auditors to verify fund management, and make reports available to the public through designated websites.
Additionally, the BSEC is introducing a look-back period of at least two years to account for refinancing of earlier projects under sustainable bonds.
Lower consent fees
To incentivise the market, the BSEC has proposed a reduced consent fee for sustainable bonds. While regular debt securities will continue to attract a 0.10% fee on the total face value, issuers of sustainable bonds will pay only 0.03%, significantly lowering the cost of issuance.
For hybrid issuances, the sustainable portion will be charged at 0.03% while the general portion will remain at 0.10%. The draft also notes that sustainable bond applications may be processed on a priority basis, signalling the regulator's commitment to promoting green and social financing.
Eligible sectors
The draft also included a list of eligible sectors and project categories.
For green financing, this includes renewable energy projects such as solar and wind, eco-friendly transport infrastructure, pollution control systems, and sustainable agriculture.
For social financing, projects such as affordable housing, health and education services, women-owned businesses, and community rehabilitation programmes have been identified.
The guidelines exclude activities with negative social impact, such as gambling, tobacco, and weapons manufacturing.
Orange bond initiative
BSEC first planned to introduce such debt securities in 2022, but the initiative has only materialised three years later.
In November last year, a consultation was held in Dhaka with the Economic Relations Division (ERD), UNDP, and IIX to discuss the feasibility and implementation of Orange Bonds in Bangladesh.
The aim of this financing initiative is to promote gender equality, climate resilience, and economic growth, potentially raising up to $1 billion through sustainable bond issuances.
Discussions emphasised that Orange Bonds could drive Bangladesh toward an inclusive and resilient economy, providing opportunities to mobilise $1 billion for the garments sector, green infrastructure, and agriculture.
Speakers had highlighted the need for climate adaptation, policy reforms, a strong market framework, and diversified sources of climate finance.
Orange Bonds are not merely financial instruments, they are powerful tools to advance gender equality, climate action, and inclusive growth, linking private investment to sustainable development, they said.
