SEBI Proposes Expansion of Sustainable Finance Framework

SEBI has proposed the introduction of Social Bonds, Sustainable Bonds, and Sustainability-linked Bonds under a new category called ESG Debt Securities to expand the sustainable finance framework in the securities market. This aims to align with global practices and provide flexibility for projects meeting environmental, social, and governance (ESG) objectives.

Markets regulator SEBI has introduced a significant proposal to expand the sustainable finance framework in the securities market by creating a new category of financial instruments. This new category will include Social Bonds, Sustainable Bonds, and Sustainability-linked Bonds, providing issuers with enhanced flexibility for projects aligned with environmental, social, and governance (ESG) objectives.

The consultation paper released on Friday outlines that issuers will now be able to raise funds through these bonds, collectively termed ESG Debt Securities. This initiative aims to bridge the funding gap for the Sustainable Development Goals, thereby aligning with global practices.

SEBI received numerous representations from market participants, including the Confederation of Indian Industry, urging an expansion of the sustainable finance regulatory framework. The paper also highlights the introduction of Sustainable Securitised Debt Instruments, aimed at providing more opportunities for investors and originators of sustainable credit facilities.

Additionally, SEBI has addressed the need for initial and continuous disclosures based on international frameworks, which could appear in offer documents or annual reports. They have also suggested the appointment of independent external reviewers to ensure transparency and credibility of ESG debt securities.

The public is invited to comment on the consultation paper by September 6.

(With inputs from agencies.)