SEBI Sets New Disclosure, Compliance Norms For ESG Debt Securities
For sustainability bonds, companies must follow rules similar to those for green and social bonds.
The Securities and Exchange Board of India has announced new rules for companies that issue green, social and sustainability bonds, starting from Thursday.
Companies issuing social bonds must share regular updates in their annual reports and financial results. They also need to hire an independent expert to review and certify that the bond proceeds are used properly.
For sustainability bonds, companies must follow rules similar to those for green and social bonds. For sustainability-linked bonds, companies have to disclose information when issuing the bonds and continue to update investors regularly. They too must appoint an independent reviewer.
The companies must have a clear process to check that the projects funded by these bonds still meet their social or environmental goals. They must use the money only for the stated purpose and report honestly about the results.
To prevent misuse of funds or false claims (called "purpose-washing"), companies need to:
Regularly check that their projects are making the promised social or environmental impact.
Not use the funds for anything outside the bond’s goals.
Inform investors if things don’t go as planned and, if needed, repay the bond early.
Avoid misleading labels or hiding important facts.
Be honest about certifications and bond ratings.
The SMEs issuing ESG bonds must follow extra post-listing disclosure rules. These companies are required to provide updates to investors at least twice a year, including continuous disclosure obligations similar to larger issuers.
