India’s market regulator, the Securities and Exchange Board of India (SEBI), plans to expand its sustainable finance framework to include a wider range of ESG-labeled instruments, potentially enhancing the market for such products in Asia. SEBI is consulting on the introduction of social bonds, as well as sustainable and sustainability-linked bonds, to complement the existing suite of environmental, social, and governance (ESG) debt.
The proposed changes also include incorporating eligible asset-backed securities and requiring independent external reviews for all ESG debt, according to a consultation paper released on Friday. This move is seen as a positive development for the market, as it could direct fixed-income capital towards new issuers and projects beyond traditional green bonds, according to Xuan Sheng Ou Yong, sustainable fixed-income lead for Asia Pacific at BNP Paribas Asset Management.
India’s issuance of ESG debt has reached $15.6 billion this year, surpassing the previous record set in 2021. However, the volume still trails behind other major Asian markets like China and Japan. Currently, the regulatory framework in India covers products that fund environmental sustainability projects, such as renewable energy and water management. The proposed changes would allow issuers to seek financing for various activities. SEBI will continue its consultation on these proposals until September 6.