• SEBI mandates rigorous pre- and post-issuance disclosures and third-party reviews for social, sustainability, and sustainability-linked bonds.
• Issuers must align ESG bonds with global standards such as ICMA Principles or Climate Bonds Standard to qualify for ESG labeling.
• New rules aim to boost investor confidence and ensure ESG integrity through transparency and verifiable impact.

The Securities and Exchange Board of India (SEBI) has issued a landmark framework for the issuance and listing of ESG debt securities, specifically targeting social bonds, sustainability bonds, and sustainability-linked bonds (SLBs). This new framework, released via circular on June 5, 2025, excludes green bonds, which are already governed by a separate set of rules.

“Only bonds funding projects aligned with recognized standards or definitions, such as those set by ICMA or the Climate Bonds Standard, may be labelled as Social, Sustainability or SLBs,” SEBI stated.

Key Requirements for Social Bonds:

Issuers of social bonds must now adhere to strict disclosure protocols before and after issuance. These include:

• Objectives of the social project, including the target population and intended benefits.
• Decision-making process for determining project eligibility.
• Tracking mechanisms for the use of proceeds.

Post-issuance, issuers are required to provide ongoing annual disclosures covering fund utilization and details of unutilized proceeds.

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“The framework requires the appointment of an independent third-party reviewer to ensure alignment with recognized standards,” SEBI noted.

Eligible use-of-proceeds categories for social bonds include:

• Affordable basic infrastructure
• Access to essential services
• Employment generation and unemployment alleviation
• Food security
• Socioeconomic advancement and empowerment

Key Requirements for Sustainability-Linked Bonds:

For SLBs, the framework demands detailed reporting on:

• The issuer’s sustainability and business strategy
• Defined Key Performance Indicators (KPIs)
• Sustainability Performance Targets (SPTs) and the rationale behind them

Third-party reviewers are also required to certify the relevance and ambition of KPIs, verify their alignment with the issuer’s broader ESG strategy, and assess how effectively these targets address ESG challenges.

SEBI emphasized, “The framework is designed to promote transparency and ensure ESG labels are backed by credible, measurable outcomes.”

SEBI’s ESG debt framework raises the bar for accountability, aiming to foster trust among investors and ensure that ESG-labeled bonds drive genuine social and sustainability impact.

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