Green buildings

Green Buildings and Energy Efficiency: The India Story  

The global pivot on sustainable development has revitalized preferences among both occupiers and developers for certified green commercial buildings. Given emerging ESG trends, most MNCs looking to lease or set up offices in India are keen to occupy premises with green and/or sustainability ratings. This trend has created significant demand for commercial assets with energy-efficient ratings, which in turn has incentivized developers to upgrade and shift focus towards green buildings. Concomitantly, green financing may be on the rise, as domestic and offshore investors seek high-quality Grade A projects that are sustainable and ESG compliant. As part of their short-term ESG goals, listed developers may want to increase their green portfolio by the end of the decade, along with ramping up renewable energy deployment.
In this situation, it is useful to examine the cost of pursuing such green goals, given the existing housing demand in India in terms of both residential buildings and Grade A commercial/industrial assets.  Emerging evidence suggests that green buildings are a higher-value, lower-risk asset than standard structures. Local developers are increasingly realizing that additional capital expenditure incurred upfront is likely to be offset by significant savings over the long term on operational costs.
The Energy Conservation (Amendment) Act, 2022 (“EC Amendment”) has included large residential buildings under its regulatory regime, along with enhancing the scope of the Energy Conservation Building Code (“ECBC”). Further, the EC Amendment has introduced the idea of sustainability, where a new building code related to energy conservation will provide norms for the use of renewable sources and green buildings. While the ECBC applies to a specified category of commercial buildings only, the new code will apply to office and residential buildings as well. Nevertheless, future digitalization may expand opportunities further. The diffusion of internet-connected devices in the residential and commercial sectors may allow added integration across demand and supply, such as by meeting India’s large-scale tri-generation requirements (cooling, heating, and power) through smart cities and district energy systems involving ‘cooling as a service’ (CaaS).

Non-convertible Debentures: Entry Routes for Foreign Investors

Since January 2020, there have been more than 10 public issues of non-convertible debentures (NCDs) and over 1,600 private placements of corporate bonds in India. M&A transactions in India have also increasingly witnessed NCDs as a preferred instrument for funding, which may be attributable to the benefits that NCDs could provide to investors vis-à-vis equity instruments. Separate regulatory frameworks apply to acquisition of NCDs by registered foreign portfolio investors on the one hand and other foreign investors on the other hand. Further, Indian regulators have sought to encourage offshore debt funding, for example, by introducing the voluntary retention route for foreign portfolio investment in debt instruments. Accordingly, this note provides an overview of investment routes available to foreign investors in relation to NCDs.

Conflicts of Interest of Investor Nominee Directors

Investors or other stakeholders routinely participate in the governance of an investee entity through nominees, often appointing a nominee as a director to safeguard its interests through the exercise of a veto or an affirmative vote (that is the right to approve or reject an act or resolution concerning the business and governance of the investee company).