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Sustainable finance in India is entering a new phase, one that goes beyond green bonds and into a broader, more inclusive approach to environmental and social impact. As global capital markets increasingly favor investments with measurable sustainability outcomes, India is refining its regulatory ecosystem to match that ambition.
In June 2025, the Securities and Exchange Board of India (SEBI) introduced a landmark framework governing ESG debt security beyond green bonds, covering social, sustainability, and sustainability-linked bonds (SLBs). This move not only strengthens India’s sustainable finance architecture but also aligns it with international best practices such as the International Capital Market Association (ICMA) Principles and the Association of Southeast Asian Nations (ASEAN) Taxonomy.
The new rules aim to ensure that ESG funds are deployed for tangible, measurable impact, with strict disclosure, verification, and post-issuance reporting requirements. More importantly, they mark a shift from voluntary “green” initiatives to a structured, regulated pathway for credible ESG debt financing.
In this blog, we break down SEBI’s 2025 ESG Debt Framework; its key components, instruments, and reporting expectations, while examining how it reshapes India’s sustainable finance ecosystem. We also discuss the major challenges faced by issuers and investors, and how they can navigate this evolving regulatory landscape effectively.
The Securities and Exchange Board of India (SEBI), in June 2025, issued a comprehensive update to its regulatory framework for ESG-labelled debt securities, expanding beyond the previously defined “green bonds” to include social bonds, sustainability bonds, and sustainability-linked bonds (SLBs). This expansion recognizes that the sustainability agenda extends far beyond environmental projects, encompassing social welfare, inclusivity, and accountability in how funds are raised and utilized.
Until recently, India’s sustainable debt market largely revolved around green bonds, governed under SEBI’s 2017 circular on Green Debt Securities. While effective in mobilizing capital for climate-friendly initiatives such as renewable energy and clean transport, this focus left a wide spectrum of social and transition-focused projects sidelined by limited funding due to absence of meaningful incentives.
The 2025 ESG Debt Framework closes that gap by incorporating all four globally recognized ESG debt categories, creating a more inclusive and accountable financing ecosystem.
Social bonds are debt instruments where the raised funds are earmarked for projects that address specific social issues. These projects can range from building affordable housing and basic infrastructure to ensuring access to essential services such as healthcare, education, and clean water.
In addition, social bonds support employment generation and socioeconomic empowerment initiatives, particularly for underprivileged or marginalized communities. By linking capital to tangible social outcomes, these bonds allow investors to track the direct impact of their investments.
From a regulatory perspective, SEBI requires detailed reporting on fund allocation and social impact metrics. Third-party verification ensures credibility, allowing investors to distinguish between genuine social impact projects and superficial claims. This structure encourages corporates to integrate social responsibility into their core financial strategy, while providing investors with confidence that capital deployment is meaningful and measurable.
Sustainability bonds are designed to fund projects with dual objectives, combining environmental benefits with social impact. For instance, a renewable energy project that also expands electricity access to underserved communities would qualify as a sustainability bond.
These bonds are particularly relevant for corporates that want to demonstrate a holistic approach to sustainability, rather than focusing solely on climate-related initiatives. SEBI’s framework mandates clear disclosure of how proceeds are allocated across environmental and social projects, alongside measurable impact reporting.
By promoting a blended approach, sustainability bonds provide investors with diversified ESG exposure while allowing corporates to finance projects that simultaneously address environmental and social challenges. This dual focus strengthens both market credibility and long-term stakeholder engagement.
Unlike social or sustainability bonds, sustainability-linked bonds (SLBs) do not require the proceeds to be earmarked for specific projects. Instead, these bonds tie financial or structural characteristics, such as the coupon rate or redemption terms to the issuer’s achievement of predefined Sustainability Performance Targets (SPTs).
SPTs are measurable, time-bound indicators aligned with ESG objectives, often covering areas such as carbon intensity reduction, water efficiency, gender diversity, or renewable energy adoption. If the issuer fails to meet the targets, the bond’s financial conditions may be adjusted, effectively incentivizing performance and accountability.
For investors, SLBs provide exposure to corporates actively embedding sustainability into their operational and strategic objectives, rather than simply financing pre-defined projects. SEBI’s framework requires transparent reporting on progress against KPIs, supported by third-party verification to maintain market integrity and trust.
SEBI’s 2025 ESG Debt Framework has been designed with a strong emphasis on global alignment, ensuring that India’s sustainable finance ecosystem is compatible with international investor expectations. The framework closely mirrors the benchmarks set by the International Capital Market Association (ICMA), including its Green Bond Principles (GBP), Social Bond Principles (SBP), and Sustainability-Linked Bond Principles (SLBP). By adopting these internationally recognized standards, India provides investors with consistent definitions, disclosure practices, and reporting methodologies, enhancing transparency, comparability, and credibility in ESG debt issuance.
Beyond ICMA alignment, SEBI has emphasized harmonization with the ASEAN Taxonomy for Sustainable Finance and the European Union (EU) Green Bond Standard. This strategic positioning enables Indian ESG debt instruments to attract cross-border capital, particularly from investors seeking harmonized, credible, and verifiable sustainability credentials. Such global alignment also signals India’s commitment to integrating its sustainable finance ecosystem with international best practices, reinforcing the country’s credibility in the global ESG investment landscape.
The 2025 circular introduces a set of mandatory provisions aimed at strengthening transparency, preventing greenwashing, and promoting accountability in ESG debt issuance. Each provision plays a critical role in ensuring that funds raised under the ESG label achieve their intended environmental or social impact. .
Issuers are required to provide a detailed breakdown of how the proceeds will be utilized, specifying the categories of eligible projects and the expected ESG outcomes. This ensures that every rupee raised under the ESG label is traceable to tangible impact, whether it is funding renewable energy infrastructure, social welfare programs, or combined environmental-social initiatives. By setting clear expectations upfront, the framework creates accountability, enabling investors to evaluate projects before committing capital.
Before issuance, SEBI mandates that issuers obtain an independent external review or second-party opinion (SPO) from SEBI-recognized agencies. This external assessment validates the alignment of the bond structure and proposed use of proceeds with ESG objectives. By involving credible third parties, the framework mitigates the risk of greenwashing and enhances investor confidence, providing assurance that the stated ESG goals are legitimate, achievable, and measurable.
Post-issuance, corporates must engage in continuous disclosure of ESG outcomes. Annual reporting is required to track the use of funds, assess the performance of projects, and communicate progress to investors. These disclosures create a feedback loop that enables investors to monitor whether the intended environmental or social impact is being delivered. Continuous reporting also encourages issuers to maintain operational focus on sustainability targets, embedding ESG accountability into long-term corporate governance.
For sustainability-linked bonds (SLBs), issuers must define Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs) that are both material and measurable. These targets are linked to the financial or structural features of the bond, such as the coupon rate, incentivizing companies to achieve genuine ESG improvements. Third-party verification of KPIs and SPTs ensures that performance metrics are reliable and credible, making SLBs an effective tool for driving performance-based sustainability outcomes.
SEBI’s 2025 ESG Debt Framework is a catalyst for transforming India’s sustainable finance ecosystem. By broadening the definition of ESG debt and introducing structured reporting requirements, the framework impacts corporates, investors, and the broader market in tangible ways.
By recognizing social bonds, sustainability bonds, and sustainability-linked bonds alongside traditional green bonds, SEBI has created a more inclusive financing environment. Corporates, financial institutions, and public entities can now access a wider pool of sustainable investors who prioritize measurable environmental and social outcomes. This inclusivity not only expands the potential investor base but also encourages organizations of different scales and sectors to engage with ESG financing, supporting a broader range of projects from renewable energy to social welfare initiatives.
The framework introduces uniform standards for disclosure, verification, and impact reporting, ensuring that all ESG debt issuances adhere to consistent, credible guidelines. This transparency reduces ambiguity and mitigates risks such as greenwashing, giving investors the clarity they need to assess the effectiveness of ESG projects. For corporates, this creates accountability and incentivizes rigorous tracking of fund utilization and impact measurement, embedding ESG considerations into strategic planning and operational processes.
Perhaps most importantly, SEBI’s framework marks a paradigm shift in India’s capital markets. Sustainability is no longer narrative-driven or voluntary; it is now tied to measurable performance indicators and regulatory oversight. Issuers must define KPIs, set sustainability performance targets (SPTs), and report outcomes annually, ensuring that ESG debt instruments deliver tangible results. This approach strengthens investor confidence, encourages responsible corporate behavior, and positions India as a credible player in the global ESG debt market, capable of meeting international standards for transparency and accountability.
While SEBI’s 2025 ESG Debt Framework represents a landmark step for India’s sustainable finance ecosystem, several practical challenges and structural gaps continue to affect market participants. Understanding these limitations is essential for corporates, investors, and reporting platforms to navigate the market effectively and ensure meaningful impact.
Complying with SEBI’s detailed disclosure requirements—including allocation of proceeds, project outcomes, and post-issuance reporting—can be operationally demanding. Corporates must consolidate and validate data across multiple projects and departments, making timely and accurate reporting a persistent challenge.
For sustainability-linked bonds (SLBs), issuers are required to define Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs) that are both material and measurable. Selecting relevant KPIs and setting realistic yet ambitious targets is difficult, particularly for organizations new to ESG-linked financing. Inconsistent or poorly defined metrics may undermine investor confidence.
SEBI mandates independent external review prior to issuance and verification of post-issuance impact. However, access to qualified verifiers and auditors with expertise in ESG debt remains limited. The lack of standardized methodologies for tracking and auditing ESG outcomes further complicates compliance, potentially delaying issuance or increasing costs.
Although SEBI’s framework provides clarity, liquidity in certain ESG debt categories, particularly social and blended sustainability bonds remains constrained. Investors’ understanding of SLBs and impact-linked instruments is still evolving, which may lead to cautious participation, pricing challenges, and slower market growth.
Successfully leveraging SEBI’s 2025 ESG Debt Framework requires corporates to adopt a structured, forward-looking approach. By addressing key operational and strategic areas, organizations can enhance compliance, demonstrate impact, and build investor confidence.
Corporates can overcome complex reporting demands by implementing structured data management systems. Centralizing ESG data across projects and departments ensures timely consolidation and validation, reducing errors and enhancing accuracy. Platforms like SAMESG ® enable automated tracking of , project outcomes, and post-issuance reporting, helping issuers meet SEBI’s disclosure requirements efficiently.
For sustainability-linked bonds (SLBs), setting material and measurable Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs) is critical. Corporates should align KPIs with strategic ESG priorities and operational capabilities, ensuring targets are ambitious yet achievable. Transparent target-setting enhances credibility with investors and strengthens the effectiveness of SLBs.
Access to qualified verifiers and auditors is essential for independent review and post-issuance validation. Corporates can prepare for verification by maintaining detailed, traceable records of ESG performance and project outcomes. SAMESG ® provides a structured platform to maintain audit-ready documentation, simplifying third-party review and reducing delays or compliance risks.
SEBI’s 2025 ESG Debt Framework marks a significant step in India’s sustainable finance journey, expanding beyond green bonds to include social, sustainability, and sustainability-linked instruments. By emphasizing transparent reporting, independent verification, and measurable performance targets, the framework strengthens market credibility and ensures that ESG investments deliver real impact.
For corporates, navigating these requirements can be complex. Platforms like SAMESG® simplify ESG data management, streamline reporting, and maintain audit-ready documentation, helping organizations align sustainability goals with regulatory expectations. Corporates that adopt structured, accountable practices will be better positioned to attract sustainable capital, demonstrate measurable impact, and contribute meaningfully to India’s ESG objectives.
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About the author
Director – Projects & Value Chain at SAM Corporate LLC
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Rajagopal Kannan is the Director of Projects & Value Chain at SAM Corporate LLC, leading ESG, risk management, and sustainability initiatives. With over 20 years of experience, including a decade in banking and financial risk, he specializes in credit structuring, Basel II & III, ISO 31000, COSO ERM, internal audit, and regulatory compliance under CBUAE, DFSA, ADGM, and SCA.
His current focus lies in ESG integration, climate and sustainability risk management, and value chain sustainability. A GRI-certified Sustainability Professional and GARP-certified SCR holder, he also holds multiple global credentials including PRM®, GRCP, GRCA, CRCMP, CBiiiPro, CSM, and CISI Level 3.
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