SEBI: The new framework issued after the market closed will be applicable from June 5 - it will have a direct impact on companies

News Topical, Digital Desk : SEBI has issued a new framework for ESG (Environment, Social and Governance) Debt Securities on 5 June 2025, which will apply to social bonds, sustainability bonds and sustainability-linked bonds in addition to green bonds. This framework is specifically for those companies and issuers who want to list or issue such bonds. Here are its main points. Let us tell you that ESG Debt Securities means such bonds or debt instruments, in which the money raised from the investment is specifically used to meet environmental, social and good governance goals. As an investor, it is important to understand and know this because it makes your investment not only a profitable deal but also responsible investing.

Key points of ESG Debt Securities Framework

First - Three new categories: Social Bonds, Sustainability Bonds, Sustainability-linked Bonds. Second - Mandatory conditions for listing and issue: These bonds should be listed on a stock exchange recognized by SEBI. Third - This rule will apply in addition to SEBI's NCS (Non-Convertible Securities) Regulation and LODR Regulation. Funds should be used for specific social, green or ESG purposes - such as affordable housing, clean energy, vocational training, food security etc. Disclosure required - Detailed reporting will be required along with annual reports and financial results before the issue and after listing. Issuers will have to tell how much money was spent in which project and what was its social or environmental impact. Third party certification required - To check the validity of these bonds and ensure that the raised funds are being spent on the right purpose, it is necessary to appoint a SEBI registered ESG Rating Provider or third party reviewer. Measures to prevent “Purpose-Washing”:- Issuers will have to do strict due diligence and monitoring to prevent misuse of funds or misleading reporting. If irregularities are found, bonds can also be redeemed prematurely with the permission of the debenture holders. Also applicable to SME issuers:- If an SME exchange-listed company wants to issue ESG bonds, then it will also have to follow all these disclosure and compliance rules. This framework has come into effect from June 5, 2025. Social Bonds: Bonds whose money is used for specific social purposes such as education, health, employment, housing etc. Sustainability Bonds: Projects with both green and social purposes can be funded in these. Sustainability-linked Bonds: Their value/returns are linked to the issuer's ESG performance - that is, returns can change when the set ESG targets are met. What are ESG Debt Securities? These are such bonds in which, upon investing money, the issuer (company or government) promises that the amount will be used specifically for: improving the environment (such as solar projects, water conservation) social development (such as affordable housing, education, health) and good governance-related activities (such as transparency, women's participation). Major categories of SG Debt Securities Category Objective Green Bonds For environmental projects (renewable energy, pollution control) Social Bonds For social purposes (affordable housing, health) Sustainability Bonds For both green + social purposes Sustainability-linked Bonds Why is it important for investors to know about the ESG performance (targets) of the company ? 

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