The Financial Services Commission (FSC) of Mauritius issued guidelines on 23 December 2021 for the issue of corporate and green bonds in Mauritius, which set out the regulatory requirements to be adopted by issuers in line with the international best practices.
Green bonds are financial instruments that finance green projects and provide investors with regular or fixed income payments. Over the past decade, green bonds have become an important tool to address the impacts of climate change and related challenges and have proved increasingly attractive to investors.
Green bonds help to connect environmental projects with capital markets and investors and channel capital towards sustainable development. Investors are becoming increasingly aware of the risks of climate change to their portfolios and stakeholders are pressuring the investment community to employ heighted environmental, social and governance (ESG) policies.
Green bonds offer investors a platform to engage in good practices, influencing the business strategy of bond issuers. They provide a means to hedge against climate change risks while achieving at least similar, if not better, returns on their investment. Green bonds enjoyed a 49% growth rate in the five years before 2021, according to Climate Bonds, whose analysis suggests the green bond market annual issuance could exceed the USD1 trillion mark by 2023.
The International Capital Market Association (ICMA) set voluntary guidelines framing the issuance of green bonds and recognised several broad categories of potential eligible projects including but not limited to:
- Renewable energy
- Energy efficiency (including energy-efficient buildings)
- Sustainable waste management
- Sustainable land use (including sustainable forestry and agriculture)
- Biodiversity conservation
- Clean transportation
- Sustainable water management (including clean and/or drinking water)
- Climate change adaptation
A subset of green bonds, known as ‘blue bonds’, are designed to support sustainable marine and fisheries projects. The World Bank defines blue bonds “as a debt instrument issued by governments, development banks or others to raise capital from impact investors to finance marine and ocean-based projects that have positive environmental, economic and climate benefits.”
In the 2020/2021 budget, the Mauritius Minister of Finance, Economic Planning and Development announced that the Bank of Mauritius (BOM) would come up with a framework for blue and green bonds and a technical committee was set up to work on the development of the domestic sustainable bonds market in Mauritius.
BOM issued a guide for the ‘Issue of Sustainable Bonds in Mauritius’ in June 2021. The new FSC guidelines for the ‘Issue of Corporate and Green Bonds in Mauritius’ are intended to serve as a supplement to the BOM guide in assisting potential issuers to understand the legal and regulatory requirements for the issue of corporate and sustainable bonds and the listing of these bonds on exchanges licensed in Mauritius.
In addition to these two sets of guidelines, issuers must also adhere to the requirements of the Companies Act 2001 and the Securities Act 2005. Depending on whether the bonds are made by way of a public offer or a private placement, issuers must also comply with the Securities (Public Offers) Rules 2007 or the Securities (Preferential Offer) Rules 2017. If the bonds are listed on a securities exchange, the issuer must also ensure that the offer document or prospectus satisfies the rules of the relevant securities exchange and the Securities (Disclosure Obligations of Reporting Issuers) Rules 2007.
The minimum issue lot is of MUR1 million (approx. USD23,000) for corporate or green bonds issued by a preferential offer, or of MUR 100,000 for corporate or green bonds issued through a public offer. Eligible issuers issuing a corporate bond of at least MUR100 million or its equivalent in any other acceptable currency, or a green bond – irrespective of the issued amount – will fall under the FSC Guidelines. In either case, the bond must have a maturity date of more than 365 days.