Description

SEBI revises the framework for appointing independent third-party reviewers/certifiers for green debt securities to align with norms applicable to social bonds, sustainability bonds, and sustainability-linked bonds under the ESG Debt Securities framework.

Summary

SEBI has issued revised norms for the appointment of an independent third-party reviewer/certifier for green debt securities. The circular modifies Chapter IX of the NCS Master Circular to align green debt security requirements with those already applicable to social bonds, sustainability bonds, and sustainability-linked bonds (collectively termed ESG Debt Securities) as specified in the June 05, 2025 circular.

Key Points

  • Paragraph 1.8 of Chapter IX of the NCS Master Circular is deleted and replaced with a new Paragraph 5 on independent third-party reviewers/certifiers.
  • The revised framework harmonizes reviewer/certifier appointment norms across all ESG Debt Securities (green, social, sustainability, and sustainability-linked bonds).
  • The independent reviewer must be free from conflicts of interest with the issuer, its directors, senior management, and key managerial personnel.
  • Reviewer remuneration must be structured to prevent conflicts of interest.
  • The reviewer must have demonstrated expertise in assessing ESG debt securities.
  • The scope of review must be disclosed in the offer document.

Regulatory Changes

  • Deletion: Paragraph 1.8 of Chapter IX of the NCS Master Circular (previous reviewer/certifier norms for green debt securities) is removed.
  • Insertion: New Paragraph 5 introduced in Chapter IX of the NCS Master Circular, prescribing updated conditions for appointment of independent third-party reviewers/certifiers for green debt securities.
  • The new paragraph aligns with the operational framework for ESG Debt Securities (other than green debt securities) issued vide SEBI circular dated June 05, 2025.
  • Background: SEBI’s December 11, 2024 amendment expanded sustainable finance scope to include social bonds, sustainability bonds, and sustainability-linked bonds under the ESG Debt Securities umbrella.

Compliance Requirements

  • Issuers of green debt securities must appoint an independent third-party reviewer/certifier who:
    • Is independent of the issuer, its directors, senior management, and key managerial personnel.
    • Is remunerated in a manner that prevents conflicts of interest.
    • Possesses expertise in assessing ESG debt securities.
  • The reviewer must ascertain that the issuance complies with the definition under Regulation 2(1)(q) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
  • Review/certification must cover processes including project evaluation and selection criteria, and project categories eligible for financing.
  • The scope of review must be specified in the offer document.
  • Applicable entities: All green debt security issuers (listed/proposing to list), recognized stock exchanges, recognized depositories, registered merchant bankers, registered debenture trustees, registered credit rating agencies, and registered ESG ratings providers.

Important Dates

  • Circular Date: February 27, 2026
  • BSE Dissemination Date: March 10, 2026
  • Original green debt securities framework: February 06, 2023 (SEBI circular SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/023)
  • NCS Master Circular reference: SEBI/HO/DDHS/DDHS-PoD/P/CIR/2025/0000000137 dated October 15, 2025
  • ESG Debt Securities expansion notification: December 11, 2024
  • ESG Debt Securities operational framework (non-green): June 05, 2025

Impact Assessment

This circular has a moderate impact on the green debt securities market in India. It standardizes the third-party reviewer/certifier framework across all ESG debt security categories, reducing regulatory fragmentation. Issuers of green debt securities will need to ensure their existing or future reviewer arrangements comply with the updated independence, remuneration, and expertise criteria. The change is primarily administrative/harmonization in nature and does not introduce substantively new obligations beyond what was already applicable to other ESG bond categories. Market participants such as merchant bankers, debenture trustees, and credit rating agencies should update their compliance checklists and offer document templates accordingly.

Impact Justification

Affects issuers of green debt securities and related market participants by modifying reviewer/certifier appointment norms, but is a harmonization measure rather than a fundamentally new requirement.