SEBI’s Operational Framework for ESG Debt Securities
Kartavya Desk Staff
Source: ET
Context: SEBI has notified a detailed operational framework for issuing Environmental, Social, and Governance (ESG) debt securities, including social, sustainability, and sustainability-linked bonds.
About ESG Debt Securities:
• What are ESG Debt Securities? ESG debt securities are financial instruments used to raise funds exclusively for projects with environmental, social, or governance benefits. These include: Social Bonds (for social impact projects) Sustainability Bonds (for combined environmental and social goals) Sustainability-Linked Bonds (with targets linked to ESG performance) Key Features of ESG Debt Securities: Funds must be utilized for eligible sustainable or social projects. Bonds must be labelled accurately based on primary project objective. Must comply with recognized international ESG standards. Require third-party verification or certification. Applicable to both public issues and private placements.
• ESG debt securities are financial instruments used to raise funds exclusively for projects with environmental, social, or governance benefits. These include: Social Bonds (for social impact projects) Sustainability Bonds (for combined environmental and social goals) Sustainability-Linked Bonds (with targets linked to ESG performance)
• Social Bonds (for social impact projects)
• Sustainability Bonds (for combined environmental and social goals)
• Sustainability-Linked Bonds (with targets linked to ESG performance)
• Key Features of ESG Debt Securities: Funds must be utilized for eligible sustainable or social projects. Bonds must be labelled accurately based on primary project objective. Must comply with recognized international ESG standards. Require third-party verification or certification. Applicable to both public issues and private placements.
• Funds must be utilized for eligible sustainable or social projects.
• Bonds must be labelled accurately based on primary project objective.
• Must comply with recognized international ESG standards.
• Require third-party verification or certification.
• Applicable to both public issues and private placements.
About SEBI’s Operational Framework for ESG Debt Securities:
• Classification Criteria: Issuers must classify bonds as green, social, or sustainability based on the primary objective of the underlying projects, ensuring clear demarcation of impact.
• Disclosure Requirements: Initial disclosures in the offer document must include project eligibility, selection process, and indicative fund distribution between financing and refinancing. Continuous disclosures to be made annually, detailing impact metrics and fund utilization.
• Initial disclosures in the offer document must include project eligibility, selection process, and indicative fund distribution between financing and refinancing.
• Continuous disclosures to be made annually, detailing impact metrics and fund utilization.
• Independent Review Mechanism: Issuers must appoint independent third-party reviewers or certifiers to validate ESG alignment, increasing investor trust and transparency.
• Monitoring and Impact Tracking: Issuers are responsible for continuous impact assessment to ensure that the funded operations effectively reduce environmental or social harm.
• Applicability and Implementation: The framework applies to all issuances of ESG debt securities from June 5, 2025, and aligns with global ESG benchmarks to attract responsible capital.