India Introduces New Rules for Social and Sustainable, Sustainability-Linked Bonds
The Securities and Exchange Board of India (SEBI) has introduced a new framework for Environment, Social, and Governance (ESG) Debt Securities, effective from June 5, 2025. This framework aims to ensure transparency, credibility, and global standards alignment for Social Bonds, Sustainability Bonds, and Sustainability-Linked Bonds (SLBs) listed on recognized Indian stock exchanges.
Key Requirements of the New SEBI Framework
Scope and Instrument Types
The new framework applies to ESG-labelled debt securities, excluding green bonds, and covers social bonds, sustainability bonds, and SLBs.
Alignment with International Standards
Issued bonds must comply with internationally recognized ESG standards such as the International Capital Market Association (ICMA) Principles, Climate Bonds Standard, ASEAN Green/Social/Sustainability Bond Standards, or Indian regulatory frameworks.
Use of Proceeds
- Social Bonds and Sustainability Bonds must finance or refinance projects with social and/or environmental benefits. Sustainability Bonds specifically fund a mix of green and social projects.
- SLBs differ in that they are not tied to specific projects but are linked to sustainability performance targets (SPTs) or key performance indicators (KPIs) that the issuer commits to achieve.
Disclosure and Reporting
- Mandatory detailed disclosure of ESG-related information, including the use of proceeds, project selection criteria, and management of funds.
- Issuers of SLBs must publicly commit to sustainability targets and disclose baseline data, target timelines, and methodologies for measuring progress.
- Post-issuance impact reporting with independent third-party verification to validate compliance with stated objectives and goals is required.
Third-Party Verification
All ESG debt issuances must undergo external review by qualified independent entities to prevent mislabelling or “purpose-washing” and to assure investors of the bonds’ credibility.
Penalties and Accountability
The framework includes provisions for penalizing misuse or failure to meet commitments, ensuring accountability and long-term trust in ESG instruments.
Social Bond Requirements
For social bond issuance, an independent third party reviewer is required to ensure alignment with recognized standards.
SLB Disclosure Requirements
For SLBs, disclosures include details of the issuer's sustainability and business strategy, definition of sustainability KPIs, details of the sustainability performance targets (SPTs), and the rationale for KPI selection and their relevance to the issuer's sustainability strategy.
Pre- and Post-Issuance Disclosure Requirements
The new framework includes disclosure requirements before and after issuance of the securities.
The new SEBI ESG Debt Securities Framework collectively aims to enhance investor confidence by ensuring clarity, accountability, and real impact of the social, sustainability, and SLB issuances under SEBI’s jurisdiction, supporting India’s broader climate and social development objectives.
- Under the new SEBI framework, green bonds are not included in the scope, but social bonds, sustainability bonds, and SLBs are to follow internationally recognized ESG standards.
- For social bond issuance, an independent third party reviewer is required to ensure alignment with recognized standards, while SLB issuers must publicly commit to sustainability targets and provide detailed disclosures about their strategies, KPIs, and performance targets.
- Compliance with the new SEBI framework requires mandatory detailed disclosure of ESG-related information, third-party verification, and post-issuance impact reporting to assure investors of the credibility and real impact of ESG instruments in supporting India's climate and social development objectives.
