SEBI has introduced a structured framework to regulate the issuance and listing of ESG debt securities, excluding green bonds, such as social bonds, sustainability bonds, and sustainability-linked bonds. This initiative is based on inputs from the Industry Standards Forum and aims to ensure credible, transparent ESG-labelled financing in India’s capital markets.

The circular defines ESG debt securities as instruments aligned with international standards but adapted to Indian requirements. The framework outlines clear definitions, issuance norms, disclosures, and post-issuance obligations:

Types of ESG Debt Securities Covered:

• Social Bonds
• Sustainability Bonds
• Sustainability-Linked Bonds

Eligibility Criteria: Issuers must use proceeds only for designated social or sustainable purposes based on ICMA, ASEAN, EU or Indian financial regulators’ standards.

Disclosure Requirements:

• Initial Disclosures: Detailed project descriptions, use of proceeds, risks, KPIs/SPTs (for SLBs), and independent reviewer details.
• Continuous Disclosures: Annual reporting on fund use, impact measurement, and performance against SPTs.

Independent Review and Certification:

• Issuers must appoint qualified third-party reviewers to verify ESG claims, KPIs, and impact reports.
• Reviewers must be independent and may include SEBI-registered ESG rating providers.

Risk Mitigation and Anti–Purpose-Washing Measures:

• Issuers must monitor that raised funds deliver genuine social or sustainability outcomes.
• Misuse or mislabelling may lead to early redemption and public disclosure.

Applicability to SME Issuers: SME issuers can list ESG debt but must follow biannual disclosure norms.