The Securities and Exchange Board of India (SEBI) has introduced an operational framework governing the issuance of Environment, Social and Governance (ESG) debt securities, including social bonds, sustainability bonds, and sustainability-linked bonds. The framework will take effect from 5 June 2025.
The move is aimed at facilitating capital-raising for projects aligned with sustainable development goals, helping bridge the financing gap for such initiatives.
According to SEBI’s circular, bonds will be classified under the ESG label only if the proceeds are allocated to financing or refinancing eligible projects. Issuers will be required to provide initial disclosures in the offer document and continuous disclosures through annual reports or other prescribed formats.
Issuers of social bonds must include detailed information in their offer documents, such as the social objectives of the project, the process for project eligibility assessment, methods for tracking the use of proceeds, and an estimate of the allocation between financing and refinancing. Where proceeds are used for refinancing, issuers must disclose existing debt details.
Issuers of sustainability bonds must comply with the norms already applicable to green debt securities.
Additionally, SEBI has mandated the appointment of an independent third-party reviewer or certifier to verify alignment of ESG-labelled debt securities with recognised international standards.
The regulator acknowledged that some social projects may generate environmental benefits and vice versa, and has left the classification of the bond type—green, social, or sustainability—to the issuer’s discretion, based on the primary objective of the underlying project.
Issuers will also be expected to continuously monitor and report the social or environmental impact of the funded projects to ensure that stated outcomes, as per the offer document, are being met.
The framework is part of SEBI’s ongoing efforts to enhance transparency and accountability in India’s growing sustainable finance market.
