SEBI has, by way of a Circular dated June 5, 2025, established a new Framework for Environment, Social and Governance (‘ESG’) Debt Securities. This framework includes social bonds, sustainability bonds, and sustainability-linked bonds. The requirements under this Circular are in addition to the requirements set out under the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 and SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015. Key aspects of this framework include:

i.    Social Bonds: Social Bonds are debt securities for raising funds for projects or assets specifically designed to address or mitigate social issues and achieve positive social outcomes. These projects include initiatives under certain prescribed categories such as affordable basic infrastructure, affordable housing etc.;

ii.   Sustainability Bonds: Sustainability Bonds represent a combination of green and social bonds, with funds allocated to finance or refinance a mix of eligible green and social projects;

iii.  Sustainability-Linked Bonds: Sustainability-Linked Bonds are debt securities whose financial and structural characteristics are tied to the issuer’s predefined sustainability objectives, measured through key performance indicators (KPIs) and assessed against specific sustainability performance targets (SPTs);

iv.   End-use: Funds raised through social and sustainability bonds have restricted uses, specifically designated for the project(s) and/or asset(s). Issuers are mandated to ensure that these funds are utilised for their stated purposes, actively preventing ‘Purpose-Washing,’ which involves misrepresenting the bond’s environmental or social benefits; and

v.    Disclosure Requirements: The Circular prescribes extensive initial and ongoing disclosure requirements for issuers, such as disclosures in the offer document detailing the project objectives, systems for tracking fund deployment, project eligibility, ongoing disclosures on utilisation of funds, etc.