SEBI issues new ESG debt framework to regulate social, sustainability, and linked bonds

Current Context: The Securities and Exchange Board of India (SEBI) has introduced a new ESG debt framework, effective June 5, 2025, to regulate social bonds, sustainability bonds, and sustainability-linked bonds.

Key Features:

• Expanded ESG categories beyond green bonds, covering social, sustainability, and sustainability-linked bonds.
• Strict disclosure norms to prevent “purpose-washing”, ensuring funds are used for intended ESG projects.
• Mandatory third-party verification to assess compliance with global ESG standards like ICMA Principles, Climate Bonds Standard, and ASEAN Standards.
• Annual impact reports required post-listing, detailing fund utilization and sustainability performance.
• Early redemption clause if funds are misused or projects fail to meet ESG objectives.

Question:

Q.1 Under the SEBI ESG debt framework, which of the following is mandatory to verify ESG compliance?
a) Government audit
b) Internal audit team
c) Peer-reviewed journal publication
d) Third-party verification

Answer: d) SEBI mandates independent third-party verification to ensure that ESG debt instruments meet globally accepted standards like ICMA Principles, Climate Bonds Standard, and ASEAN Standards.