India’s markets regulator, the Securities and Exchange Board of India (SEBI), has announced a proposal to expand the sustainable finance framework within the securities market by introducing a new category of financial instruments termed ESG Debt Securities. This initiative includes Social Bonds, Sustainable Bonds, and Sustainability-linked Bonds, building on the existing green debt securities.
The new category is designed to provide issuers greater flexibility in fundraising for projects that adhere to environmental, social, and governance (ESG) principles, thereby supporting efforts to meet the Sustainable Development Goals. SEBI’s move comes in response to feedback from market participants, including the Confederation of Indian Industry, which suggested expanding the sustainable finance regulatory framework to encompass a broader range of instruments that align with global practices.
Furthermore, SEBI is considering the introduction of Sustainable Securitised Debt Instruments. These instruments aim to provide opportunities for investors to participate in projects that have underlying credit facilities meeting international or domestic frameworks for sustainable finance.
As per a consultation paper released on 16th August, Sebi said it “proposed to introduce the concept of Sustainable Securitised Debt Instruments for the purpose of providing originators of the underlying credit facilities which are within such international or domestic frameworks for sustainable finance, and thereby provide investors as well an opportunity to participate in the sustainable securitised debt instruments.”
The consultation paper also details the necessary initial and ongoing disclosure requirements for these new instruments, which would be based on international standards. SEBI recommends that issuers of ESG debt securities and sustainable securitised debt instruments engage an independent external reviewer or certifier to ensure transparency and credibility. The review process may include second-party opinions, verification, certification, or scoring/rating.
SEBI has called for public feedback on the proposals detailed in the consultation paper, with a deadline for comments set for September 6. This step marks a significant advancement in integrating sustainability into the Indian securities framework, reflecting a growing global emphasis on sustainable finance.