The SEBI has unveiled a comprehensive framework to regulate ESG debt securities, setting new standards for the issuance of social bonds, sustainability bonds, and SLBs.
Announced via circular on 5 June 2025, the framework marks a major regulatory step in aligning India’s ESG debt market with global best practices. Notably, green bonds are not included under this guidance, as they are already governed by an earlier framework, according to ESG News.
According to SEBI, only bonds funding projects that comply with established international standards—such as those of the International Capital Market Association (ICMA) or the Climate Bonds Standard—can be classified as social, sustainability, or sustainability-linked. The regulator stressed that “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.”
For social bonds, SEBI has introduced stringent disclosure obligations both before and after issuance. Issuers must clearly outline project objectives, identify the target population and anticipated social outcomes, and describe the decision-making criteria for project selection. Additionally, issuers must implement mechanisms to track how proceeds are allocated and commit to publishing annual updates detailing fund usage and any unutilised amounts.
Issuers are also required to engage an independent third-party reviewer to verify that the bond aligns with recognised standards. “The framework requires the appointment of an independent third-party reviewer to ensure alignment with recognized standards,” SEBI noted.
The eligible use-of-proceeds for social bonds includes funding affordable infrastructure, enhancing access to essential services, promoting employment, ensuring food security, and enabling socioeconomic empowerment.
In the case of SLBs, the new rules demand even more granular reporting. Issuers must disclose their overarching sustainability strategy, define relevant Key Performance Indicators (KPIs), and establish measurable Sustainability Performance Targets (SPTs). Third-party verifiers will be responsible for evaluating the relevance and ambition of these targets, ensuring their alignment with the issuer’s wider ESG objectives, and assessing their effectiveness in tackling key ESG challenges.
SEBI reinforced the goal of this initiative, stating, “The framework is designed to promote transparency and ensure ESG labels are backed by credible, measurable outcomes.”
By enforcing these guidelines, SEBI aims to build investor confidence and prevent ESG-washing in the Indian bond market. The framework ensures that ESG-labelled instruments are not just symbolic but tied to tangible, verifiable outcomes that contribute meaningfully to sustainable development.
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