India’s capital markets are witnessing a critical shift in how sustainability is financed. With the release of the Securities and Exchange Board of India (SEBI)’s June 2025 “Framework for Environment, Social and Governance (ESG) Debt Securities (other than green debt securities)”, the SEBI has introduced a robust regulatory framework for the issuance and listing of ESG bonds—specifically social bonds, sustainability bonds, and sustainability-linked bonds (SLBs). This move marks a significant evolution in the country’s ESG bond market, aiming to enhance credibility, transparency, and alignment with global standards.

The June 2025 circular is not merely a compliance checklist—it reflects SEBI’s intention to build genuine impact-driven finance. For issuers, the new framework raises the bar of accountability. For investors, it builds greater trust in the instruments they support. And for the market as a whole, it promises long-term resilience and alignment with India's climate and social development goals.

Why a new framework was needed

As interest in ESG bonds surged globally, India’s bond market needed a formal structure to ensure these instruments did more than just carry a label. While green bonds have been regulated since 2017, there was growing demand for clarity and regulation around other ESG-related instruments—specifically, social bonds, sustainability bonds, and sustainability-linked bonds.

The new SEBI ESG bond framework was introduced on 5 June 2025 to fill this gap. It sets the groundwork for a well-regulated, transparent ESG bond market where disclosures are mandatory, third-party reviews are non-negotiable, and misuse is penalised.

Who does the circular apply to?

The guidelines apply to all issuers who wish to list ESG debt securities (excluding green bonds) on recognised Indian stock exchanges. This includes corporate entities, public sector undertakings, and financial institutions looking to raise capital through ESG-labelled instruments.

Types of instruments covered

The framework clearly defines and classifies three non-green ESG bond categories:

This classification removes ambiguity and helps investors better assess the intent and impact of each issuance.

Key provisions of the SEBI ESG bond framework

Each bond type is now backed by specific definitions tied to the intended use of proceeds and expected sustainability outcomes. Issuers must also demonstrate how their projects align with internationally accepted frameworks such as the ICMA Principles, Climate Bonds Standard, ASEAN Standards and European Union Standards.

A cornerstone of the framework is the introduction of an independent third-party reviewer. Issuers must appoint reviewers who are responsible for validating ESG objectives, reviewing disclosures, and verifying impact data both before and after issuance. This builds objectivity and ensures issuers are held accountable.

Transparency is central to SEBI’s approach. Issuers must provide:

  • Pre-issuance disclosures, including:
    • Clear project goals and ESG objectives
    • Identification of target populations (especially in the case of social bonds)
    • Mechanisms for tracking outcomes
  • Post-listing disclosures, including:
    • Detailed reports on the utilisation of proceeds
    • Metrics capturing social or environmental impact
    • Validation of outcomes by third-party reviewers

These disclosures must be publicly available and updated periodically, ensuring ongoing accountability.

To maintain the integrity of ESG instruments, the circular mandates that bonds must:

  • Comply with global norms on ESG investing
  • Fund eligible projects that offer measurable outcomes
  • Avoid misleading labels or claims

This move helps differentiate genuine ESG bonds from those that may otherwise exaggerate their sustainable credentials.

To discourage misuse, the framework introduces specific clauses requiring issuers to:

  • Disclose any deviation from stated ESG goals
  • Provide remedial action plans
  • Allow for early redemption in case of ESG compliance failure

This provision ensures that the financial implications of falling short on ESG commitments are real and enforceable.

The SEBI’s ESG bond framework is a defining moment for India’s sustainable finance journey. It institutionalises trust and reinforces that ESG bonds must deliver tangible, verifiable outcomes. By involving independent third-party reviewers, mandating disclosures, and aligning with global best practices, SEBI is paving the way for a more credible and scalable ESG bond market.

Moreover, these guidelines could help unlock greater international investment in India’s ESG landscape, as global investors increasingly demand rigorous standards. Indian issuers—whether corporates or state-backed entities—now have a clear path to raise funds ethically, transparently, and with measurable impact.

Conclusion: From label to legacy

The SEBI’s June 2025 ESG guidelines signify a shift from labelling compliance to building investor confidence in ESG-linked instruments. As India seeks to meet its climate and sustainable development goals, regulated and reliable ESG bonds will be instrumental in channelling private capital into public good. For investors, this means better risk assessment and impact visibility. For issuers, it’s a chance to build brand trust and demonstrate genuine responsibility. By redefining the contours of ESG finance in India, SEBI has taken a bold step that sets the foundation for a future where sustainable investing is not just aspirational, but operational.

From compliance to confidence
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From compliance to confidence

ESG bond certification explained: July 2025