SEBI Unveils New ESG Debt Framework for Social, Sustainability & Linked Bonds.

In June 2025, the Securities and Exchange Board of India (SEBI), the capital markets regulator headquartered in Mumbai, Maharashtra, introduced a new regulatory framework to govern the issuance and listing of Environmental, Social, and Governance (ESG) debt securities in India.

      - The comprehensive framework applies specifically to social bonds, sustainability bonds, and Sustainability-Linked Bonds (SLBs), while notably excluding green bonds from its purview. These new regulations officially came into effect on June 5, 2025.

      - This initiative aims to strengthen India’s ESG debt ecosystem by enhancing transparency, credibility, and investor confidence, thereby supporting the nation’s broader sustainable development goals (SDGs) and promoting responsible financing.

      - In June 2025, SEBI launched a new ESG debt framework under its 2025–2028 Sustainable Finance Roadmap. It covers social, sustainability, and Sustainability-Linked Bonds (SLBs), excluding green bonds. The framework aligns with global standards like ICMA Principles and ASEAN guidelines, requiring social bonds to fund projects in areas such as essential services, infrastructure, employment, and food security.

Main Point :-   (i) The framework mandates detailed pre- and post-issuance disclosures. Issuers must share objectives, project selection, and target beneficiaries upfront. After issuance, annual reports must outline fund use, unused proceeds, and impact metrics. This ensures transparency and allows stakeholders to assess the social and environmental impact of ESG projects, strengthening accountability in the ESG debt market.

      (ii) SEBI’s framework mandates independent third-party verification for all ESG-labelled bonds. For bonds to qualify as social, sustainability, or SLBs, proceeds must fund projects aligned with ESG goals. SLB issuers must disclose sustainability strategies, Key Performance Indicators (KPIs), and Sustainability Performance Targets (SPTs). Third-party reviewers assess whether these goals are credible and achievable, reinforcing investor confidence by ensuring that the bonds genuinely support sustainable development objectives.

(iii) The framework defines three ESG debt types: Social Bonds fund projects like housing, education, and healthcare; Sustainability Bonds support both environmental and social goals; SLBs are tied to issuers meeting set sustainability targets (SPTs), with rewards or penalties based on results. These categories align India’s capital markets with global sustainability norms.
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