Description

SEBI modifies Chapter IX of the NCS Master Circular to align appointment requirements for independent third-party reviewer/certifier for green debt securities with norms applicable to social bonds, sustainability bonds, and sustainability-linked bonds.

Summary

SEBI has revised the norms for appointment of an independent third-party reviewer/certifier for green debt securities by modifying Chapter IX of the NCS Master Circular for Non-Convertible Securities (NCS). The revision aligns green debt security requirements with those already applicable to social bonds, sustainability bonds, and sustainability-linked bonds under the June 05, 2025 circular, consolidating ESG Debt Securities governance under a uniform framework.

Key Points

  • Paragraph 1.8 of Chapter IX of the NCS Master Circular is deleted and replaced with a new “Paragraph 5” covering independent third-party reviewer/certifier requirements.
  • The issuer must appoint an independent third-party reviewer/certifier to confirm that the green debt security issuance complies with the definition under Regulation 2(1)(q) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
  • The reviewer must be independent of the issuer, its directors, senior management, and key managerial personnel.
  • The reviewer must be remunerated in a manner that prevents conflicts of interest.
  • The reviewer must have expertise in assessing ESG debt securities.
  • The scope of the review(s) must be disclosed in the offer document.
  • This circular was issued on February 27, 2026 by SEBI (HO/17/11/24(1)2026-DDHS-POD1/I/5967/2026).

Regulatory Changes

  • Deletion: Paragraph 1.8 of Chapter IX of the NCS Master Circular is deleted.
  • Insertion: A new Paragraph 5 titled “Independent third-party reviewer/certifier” is inserted in Chapter IX of the NCS Master Circular.
  • The change harmonises green debt security reviewer appointment rules with the framework established for other ESG Debt Securities (social bonds, sustainability bonds, sustainability-linked bonds) under the SEBI circular dated June 05, 2025.
  • Background: SEBI’s December 11, 2024 amendment notification expanded the scope of sustainable finance to include social bonds, sustainability bonds, and sustainability-linked bonds, collectively termed “ESG Debt Securities” alongside green debt securities.

Compliance Requirements

  • Issuers of green debt securities must appoint an independent third-party reviewer/certifier meeting the prescribed independence, remuneration, and expertise conditions.
  • Offer documents must specify the scope of review(s) conducted by the independent third-party reviewer/certifier.
  • All intermediaries (stock exchanges, depositories, merchant bankers, debenture trustees, credit rating agencies, and ESG ratings providers) must note and implement the revised provisions.
  • The reviewer must:
    • Be independent of the issuer, its directors, senior management, and KMPs.
    • Be remunerated without creating conflicts of interest.
    • Possess expertise in assessing ESG debt securities.

Important Dates

  • Circular Date: February 27, 2026
  • Reference Circular (green debt securities framework): February 06, 2023 (SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/023)
  • NCS Master Circular Reference: October 15, 2025 (SEBI/HO/DDHS/DDHS-PoD/P/CIR/2025/0000000137)
  • ESG Debt Securities operational framework circular: June 05, 2025
  • SEBI amendment notification expanding ESG scope: December 11, 2024
  • Effective date for the revised norms: as per the circular (February 27, 2026); applicable to issuers listing green debt securities going forward.

Impact Assessment

This circular has a medium operational impact on issuers of green debt securities and their intermediaries. It does not introduce fundamentally new obligations but strengthens the governance framework by:

  1. Standardising ESG reviewer norms across all ESG Debt Security categories (green, social, sustainability, sustainability-linked), reducing regulatory fragmentation.
  2. Tightening independence criteria for third-party reviewers, which may affect existing arrangements where reviewer independence or remuneration structures did not fully align with the new conditions.
  3. Impacting offer document disclosures — issuers must now explicitly state the scope of third-party reviews in offer documents.
  4. Entities such as merchant bankers, debenture trustees, credit rating agencies, and ESG ratings providers will need to update their due diligence and compliance checklists for green debt security mandates.
  5. No direct impact on equity markets or trading operations; the circular is confined to the debt/ESG securities segment.

Impact Justification

Regulatory alignment update affecting issuers of green debt securities and related intermediaries; modifies existing NCS Master Circular provisions without introducing entirely new obligations, but mandates specific independence and expertise criteria for third-party reviewers.