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No Purpose-Washing: SEBI notifies strict guidelines for ESG-tagged bondsSEBI has issued a comprehensive operational framework for social, sustainability, and sustainability-linked bonds, aimed at preventing purpose-washing and boosting transparency in India’s growing ESG debt market.By Sheersh Kapoor   June 5, 2025, 6:02:52 PM IST (Published)2 Min ReadThe Securities and Exchange Board of India (SEBI) has notified a comprehensive framework governing the issuance and listing of ESG-labelled debt securities — excluding green bonds — to enhance transparency and mitigate the risk of 'purpose-washing' in India’s sustainable finance ecosystem.

Effective from June 5, 2025, the framework applies to social bonds, sustainability bonds, and sustainability-linked bonds issued under SEBI’s NCS Regulations. These instruments, along with green debt securities, are collectively classified as environment, social and governance (ESG) debt securities.

The SEBI document sets out detailed guidelines on eligibility, disclosures, post-issuance reporting, and use of proceeds for ESG-tagged debt instruments.

Clear definitions and exclusions to prevent purpose-washing

SEBI has clearly defined eligible use of proceeds, with social bonds expected to fund projects related to areas such as affordable housing, clean drinking water, food security, sanitation, employment generation, and access to education or health.

Sustainability bonds must combine both social and environmental outcomes, while sustainability-linked bonds (SLBs) must tie bond terms to the issuer’s ESG performance targets.

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To prevent green or social washing, SEBI has barred ESG proceeds from funding projects involving fossil fuels, alcohol, tobacco, gambling, weapons, environmentally-harmful activities, or those violating national or international human rights or environmental standards.

Issuers must also obtain an independent external review at the time of issuance. For SLBs, detailed disclosure of key performance indicators (KPIs), sustainability performance targets (SPTs), and the methodology for calculating achievement levels is mandatory.

Ongoing reporting and broader market safeguards

Issuers are required to make annual disclosures on both the utilisation of proceeds and the environmental or social impact until full deployment. These reports should include a management statement on unallocated proceeds and measurable outcomes of the financed projects.

Importantly, the framework only applies to listed corporate bonds and does not cover sovereign or municipal ESG-labelled issuances.

SEBI also noted that ESG rating providers can voluntarily register — a move aimed at ensuring consistency and credibility in ESG verification and reporting practices.

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By aligning the Indian framework with international standards such as ICMA Principles, Climate Bonds Standard, ASEAN and EU taxonomies, SEBI aims to position India as a credible and transparent ESG debt market globally.Continue Reading(Edited by : Shoma Bhattacharjee)Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!TagsBondsESGnew sebi rulesSEBIshare market today