- with Inhouse Counsel
- with readers working within the Automotive, Chemicals and Utilities industries
I. Background
The Securities and Exchange Board of India (“SEBI”) amended the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“NCS Regulations”), through the Third Amendment Regulations, 2024 to bring environmental, social and governance (“ESG”) debt securities within the Indian regulatory framework. While the definition of “ESG Debt Securities” was an important regulatory acknowledgement of ESG-linked financial instruments, the long-awaited framework governing the issuance and listing of such securities was introduced, through SEBI’s circular dated June 5, 2025 (“Framework”), under Regulation 12A of the NCS Regulations.
The Framework sets out the eligibility criteria, disclosure obligations and compliance requirements for issuers of ESG-labelled bonds. It came into effect on June 5, 2025, and applies to all issuances of ESG Debt Securities made on or after that date. The Framework applies to ESG Debt Securities other than green debt securities (“GDS”), which continue to be 1governed by SEBI’s existing framework. The Framework has since been incorporated into Chapter IX of the Master Circular for issue and listing of Non-Convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper dated October 15, 2025 (“NCS Master Circular”).2 Practitioners should therefore refer to the consolidated NCS Master Circular, rather than the standalone circular, for compliance purposes.
II. Analysis
1. Meaning and Types of ESG Debt Securities
The NCS Regulations define ESG Debt Securities as “green debt securities, social bonds, sustainability bonds, sustainability-linked bonds, or any other type of bonds, by whatever name called, that are issued in accordance with such international frameworks as adapted or adjusted to suit Indian requirements that are specified by the Board from time to time, and any other securities as specified by the Board.” The different types of ESG Debt Securities are identified in the diagram below.
2. Disclosure Requirements
The Framework imposes certain requirements across all ESG Debt Securities, regardless of the category of bond issued. Issuers must make the prescribed disclosures and appoint an independent third-party reviewer to assess alignment with recognised standards. Initial disclosures must be included in the offer document, while continuing disclosures must be made through annual reports or other periodic reports prescribed under the Framework. Where the proceeds are proposed to be used for refinancing, issuers must also disclose details of the existing debt to be refinanced, including the outstanding amount. In addition, the Framework prescribes category-specific disclosures, as discussed below:
a) Green Bonds: An issuer proposing to issue green bonds must include, in the offer document, a clear statement of the environmental sustainability objectives, the decision-making process for determining project eligibility, and the alignment with recognised green standards or certifications. The issuer must also disclose procedures for tracking the use of proceeds, details of the projects or assets to be financed or refinanced, the planned temporary use of unallocated proceeds, and any perceived social and environmental risks together with mitigation measures. On a continuing basis, issuers of listed green bonds must report the utilisation of proceeds, have this verified by an external auditor, and provide details of any unutilised funds. Annual reports must also include the list of financed projects, brief descriptions and amounts disbursed, qualitative and quantitative environmental impact indicators where feasible, the methodology and assumptions used, updates on risk mitigation, and project-wise impact reporting by reference to applicable reporting standards or taxonomies.
b) Social Bonds: An issuer proposing to issue social bonds must make additional disclosures in the offer document for a public issue or private placement. These include the social objectives of the relevant social project, brief details of the decision-making process used to determine project eligibility, the procedures for tracking deployment of the proceeds, and an indicative estimate of the allocation between financing and refinancing of projects.
c) Sustainability Bonds: An issuer proposing to issue sustainability bonds must comply with the disclosure requirements applicable to green bonds as well as the disclosure requirements prescribed for social bonds under the Framework.
d) Sustainability-Linked Bonds: An issuer proposing to issue sustainability-linked bonds (“SLB”) must make additional disclosures in the offer document for a public issue or private placement. These include the Indian and global taxonomies, standards or certifications referenced; details of the key performance indicators (“KPIs”),3 including the definition of each KPI, the associated calculation methodology and the benchmarks used; and details of the sustainability performance targets (“SPTs”)4 linked to the selected KPIs, including their definition, calculation methodology and benchmarks. The offer document must also explain the rationale and process for selecting the KPIs, how they fit into the issuer’s business strategy, and how they address relevant ESG challenges.
3. Recognition of Globally Accepted Standards
In addition to defining each category of ESG-labelled bond, the Framework recognises several globally accepted standards, including: (a) the International Capital Market Association Principles/Guidelines (“ICMA Principles”); (b) the Climate Bonds Standard; (c) the Association of Southeast Asian Nations (“ASEAN”) standards; and (d) European Union standards (“EU Standards”). In June 2025, the International Capital Market Association (“ICMA”) updated the ICMA Principles by expanding the definition of “Green Projects” under the Green Bond Principles to include “activities” in addition to assets, investments and expenditures. A corresponding amendment was made to the Social Bond Principles, broadening the definition of “Social Projects” in the same manner. ICMA also published Sustainable Bonds for Nature: A Practitioner’s Guide in June 2025, introducing the optional secondary designation of a “Nature Bond” for green bonds whose proceeds are allocated exclusively to nature-related projects. The Framework also permits ESG-labelled bonds to align with any framework or methodology specified by a financial sector regulator in India. In that context, a significant domestic development followed the issuance of the Framework. On November 28, 2025, the Reserve Bank of India (“RBI”) issued the Master Directions on Climate Finance and Management of Climate Change Risks5, establishing a comprehensive climate finance framework for commercial banks and repealing the earlier Framework for Acceptance of Green Deposits dated April 11, 2023. It remains unclear whether the RBI Directions qualify as a “framework or methodology specified by a financial sector regulator in India” under the SEBI Framework. If they do, they may expand the range of domestic standards with which ESG Debt Securities can align.
The relevance of these globally recognised standards is twofold: they help identify eligible projects or assets for which capital may be raised under the Framework, and they inform the continuing obligations that apply where securities are aligned with a particular standard. The EU Standards have also evolved significantly. The European Green Bond Standard Regulation (Regulation (EU) 2023/2631) became applicable on December 21, 2024, and the European Commission published interpretive FAQs in November 2025. Although the EU Standards continue to apply primarily to green bonds and have limited direct application in the Indian market, they now represent a fully operational regulatory regime with mandatory European Union taxonomy alignment requirements, including at least 85% proceeds alignment, supervision of external reviewers by the European Securities and Markets Authority, and transition plan disclosure requirements. Issuers looking to attract international capital should be mindful of these developments and of the possible convergence between Indian and international sustainable finance frameworks.
4. Third-Party Independent Certification
To establish whether ESG-labelled bonds are aligned with applicable globally recognised standards, the issuer must appoint an independent third-party reviewer or certifier. The offer document must also disclose the scope of the review and details of the reviewer.
SEBI subsequently issued a circular dated February 27, 20266, revising the norms for appointment of independent third-party reviewers or certifiers for green bonds and aligning them with the requirements applicable to social bonds and sustainability bonds under the Framework. Under the revised norms, paragraph 1.8 of Chapter IX of the NCS Master Circular has been deleted and replaced with a new paragraph 5 prescribing unified conditions for the appointment of independent reviewers across all categories of ESG Debt Securities.
5. Broader Regulatory Ecosystem and Parallel Frameworks
The Framework forms part of a wider regulatory architecture for sustainable finance in India, rather than operating in isolation:
First, ESG Debt Securities issued within the International Financial Services Centre (“IFSC”) at GIFT City, Gandhinagar, are governed by Chapter X of the IFSCA (Listing) Regulations, 2024, issued by the International Financial Services Centres Authority (“IFSCA”). This creates a separate regulatory route for Indian and foreign issuers seeking to list ESG-labelled debt on IFSC exchanges. The IFSCA has also issued a Master Circular for ESG Ratings and ‘Data Products Providers’, further developing that ecosystem. Issuers should therefore determine at the outset whether they propose to list on domestic exchanges, governed by SEBI, or on IFSC exchanges, governed by IFSCA, because the applicable regulatory requirements differ.
Second, in May 2025, the Ministry of Finance, Department of Economic Affairs released a draft Framework of India’s Climate Finance Taxonomy for public consultation, aimed at facilitating approximately US$250 billion per year in climate-related finance. The taxonomy proposes a phased approach to classifying activities that contribute to climate mitigation and adaptation, with sector-specific criteria and technical screening thresholds. Once finalised, it is likely to become an important reference point for identifying eligible green and transition projects under the SEBI Framework, and may operate as a domestic equivalent to the EU Taxonomy for project classification. The draft taxonomy also proposes a governance mechanism involving sectoral technical committees, although the anchor institution for regulatory oversight remains to be designated.
Third, the Framework should be read alongside SEBI’s Business Responsibility and Sustainability Reporting (“BRSR”) framework for listed entities. SEBI issued a circular dated March 28, 2025 on ease of doing business in relation to ESG disclosures for value chains and voluntary disclosure on green credits. Issuers of ESG Debt Securities that are also listed entities will need to ensure consistency between bond-level ESG disclosures and entity-level BRSR reporting, as investors are likely to cross-reference these disclosures when assessing ESG credibility.
Fourth, the Framework does not presently address climate transition bonds, i.e., instruments designed to finance an issuer’s transition towards an environmentally sustainable business model, particularly in hard-to-abate sectors. Although ICMA released FAQ guidance for Climate Transition Bonds in June 2026, and transition finance is gaining global traction, these instruments do not yet have an express regulatory home under the Indian framework. Whether transition bonds can be accommodated within the catch-all category of “any other type of bonds, by whatever name called” in the NCS Regulations remains an open question that SEBI may need to address as India’s decarbonisation agenda matures.
III. Impact
The Framework seeks to address the credibility concerns that have often been discussed in relation to ESG-labelled instruments in India by establishing enforceable standards aligned with international frameworks such as the ICMA Principles and the Climate Bonds Standard. By requiring detailed pre-issuance and continuing disclosures, together with independent third-party verification, the Framework should reduce the risk of “purpose-washing” and help ensure that ESG claims are supported by verifiable evidence rather than self-certification.
The early market response to the Framework has been encouraging. According to data published by SEBI as of June 30, 2026, several notable ESG debt issuances have taken place since the Framework came into effect. These include sustainability-linked bonds issued by Larsen & Toubro Limited (INR 500 crore in June 2025), Mindspace Business Parks REIT (INR 550 crore in August 2025) and Brookfield India Real Estate Trust (INR 2,000 crore in December 2025), as well as green bond issuances by municipal corporations such as Surat Municipal Corporation and Greater Chennai Corporation. Further, the SEBI data dated July 31, 2026 records additional green bond issuances in 2026, including Greater Chennai Corporation (INR 206 crore), Nashik Municipal Corporation (INR 200 crore) and Bank of Baroda (INR 10,000 crore).
This pattern suggests that both large corporate issuers and public sector entities have been able to access the market during the Framework’s first year of operation. Institutional investors should also benefit from the Framework, as it gives them a clearer basis for diligence through transparent fund-utilisation tracking and measurable outcome reporting. The Framework may also support India’s integration into global ESG capital flows, as international investors seeking standards-compliant instruments now have a clearer domestic regulatory architecture against which to assess Indian ESG debt. It is also worth noting that the Framework gives issuers listed on SME exchanges some flexibility, allowing post-issuance reports to be filed semi-annually rather than annually and thereby partially addressing the resource constraints of smaller issuers.
The Framework is a welcome and necessary step towards filling a regulatory gap in India’s sustainable finance architecture, particularly as the country seeks to mobilise private capital for climate and social development goals. That said, certain refinements may be needed to improve its effectiveness within the Indian legal framework. The distinction between green bonds, which are governed by the pre-existing SEBI framework as revised in February 2026, and other ESG Debt Securities covered by the new Framework may create some market fragmentation, even though SEBI has sought to align the two regimes through revised third-party reviewer norms. The Framework also assumes that there will be enough qualified third-party reviewers, which may be challenging at this stage of India’s ESG ecosystem. Over time, however, the growing pool of SEBI-registered ESG rating providers eligible to act as reviewers should help ease this concern.
The Framework also does not prescribe specific consequences for an issuer’s failure to meet sustainability performance targets in the context of SLBs, beyond disclosure obligations. Globally, market practice has moved towards coupon step-up mechanisms and redemption premium adjustments as financial consequences for missed targets. In India, however, the enforceability of these mechanisms under contract law and securities regulations, and the adequacy of existing enforcement tools under the SEBI Act to address ESG misrepresentation, remain areas where further regulatory guidance would be useful.
The finalisation of India’s climate finance taxonomy, the operationalisation of the RBI’s climate finance directions, and the maturation of SEBI’s ESG rating provider ecosystem will collectively shape the next phase of India’s sustainable debt market. Together, these initiatives could help establish India as a credible and attractive jurisdiction for ESG capital mobilisation, provided they are implemented in a coordinated and effective manner. A phased implementation approach, scaled support mechanisms, clearer integration between the SEBI Framework and the green bonds regime, and the development of a comprehensive domestic taxonomy would make the Framework more accessible and support wider adoption across issuers of different sizes and levels of sophistication.
Footnotes
1 Please refer to SEBI circular no. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/023 dated February 6, 2023.
2 The document can be accessed at SEBI | Master Circular for issue and listing of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper.
3 Key Performance Indicators are quantifiable metrics used to measure the performance of selected indicators.
4 Sustainability Performance Targets are measurable improvements in KPIs that an issuer commits to within a predefined timeline.
5 Notification No. DOR.SFG.REC. No.91/30.01.021/2025-26.
6Circular no. HO/17/11/24(1)2026-DDHS-POD1/I/5967/2026.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
