New SEBI Rules Mandate Independent Review of Green Debt Issuances

SEBI Revises Green Debt Framework, Mandates Independent ESG Reviewers for Issuances​

The Securities and Exchange Board of India has revised the framework governing green debt securities, bringing it in line with the broader norms applicable to Environmental, Social, and Governance debt instruments. The updated guidelines take immediate effect and introduce stricter requirements for independent external review and certification of green bond issuances.

Independent Third-Party Certification Now Mandatory​

Under the amended NCS Master Circular, issuers of green debt securities must appoint an independent third-party reviewer or certifier. The reviewer will be responsible for verifying that the issuance complies with the definition prescribed under Regulation 2 of the SEBI Regulations, 2021.

According to the revised framework, the external reviewer must confirm that the issuance adheres to regulatory standards, including project evaluation and selection processes, and that the project categories financed through green debt securities qualify under applicable norms.

The reviewer must remain independent of the issuer and its management. Additionally, the remuneration structure must be conflict-free to ensure impartial assessment. The certifier is also required to possess demonstrable expertise in evaluating ESG debt instruments.

Disclosure of Review Scope in Offer Documents​

SEBI has clarified that the scope of the external review must be explicitly disclosed in the offer document. The review may take various forms, including second-party opinions, verification, certification, scoring, or ratings.

The framework also aligns with global standards, including recommendations of the International Capital Market Association, reinforcing transparency and consistency in sustainable finance practices.

Alignment with Broader ESG Debt Norms​

The move follows the regulator’s earlier expansion of sustainable finance norms to include social bonds, sustainability bonds, and sustainability-linked bonds. These instruments are collectively categorized as ESG debt securities.

By harmonizing green debt regulations with the broader ESG framework, SEBI aims to strengthen accountability, improve disclosure standards, and ensure greater investor confidence in sustainable financing instruments.

Understanding ESG Metrics and Disclosure Framework​

An ESG score evaluates a company’s performance across environmental, social, and governance parameters. The environmental aspect examines factors such as carbon emissions, energy usage, pollution levels, and waste management practices.

The Companies Act 2013 and the 2021 Business Responsibility and Sustainability Reporting framework have already mandated ESG-related disclosures for top listed companies, embedding sustainability considerations into corporate reporting practices.

With the revised green debt framework now in force, issuers must ensure strict compliance with certification, disclosure, and governance standards, reinforcing the credibility of India’s sustainable finance ecosystem.