SEBI tightens ESG disclosure norms, shifting from voluntary intent to enforceable standards
Top 250 listed firms must now report on value chain sustainability performance
Green bonds and sustainability-linked instruments reshape capital markets
BRSR Core framework introduces audit-level precision and comparability
India’s corporate sector is entering a new regulatory era, as environmental, social and governance (ESG) norms shift from voluntary disclosures to enforceable standards, driven by the shift to a low-carbon economy and heightened transparency requirements. With the Securities and Exchange Board of India (SEBI) tightening reporting rules and expanding accountability across value chains, sustainability is not peripheral any more. It is becoming embedded in the architecture of business itself, reshaping corporate governance, value chain accountability and financial resilience.
SEBI remains the principal architect of India’s ESG regulatory framework. Rather than creating a standalone watchdog, the government has chosen to strengthen existing institutions, signalling that sustainability will be integrated within mainstream financial regulation rather than treated as a parallel compliance stream.
This integration is visible in concrete steps. ESG rating agencies are now permitted to withdraw ratings if companies fail to file their Business Responsibility and Sustainability Reports (BRSR), reflecting ongoing regulatory refinement.
On June 5, 2025, the SEBI issued a formal framework for the issuance and listing of ESG-labelled debt securities:
Social Bonds: Debt securities where proceeds are used to finance or refinance projects that deliver positive social outcomes are called social bonds. It includes affordable basic infrastructure, access to essential services (health, education, sanitation), affordable housing, employment generation and unemployment alleviation, food security and sustainable food systems, socio-economic advancement and empowerment
Sustainability Bonds: Instruments that finance a mix of environmental and social projects. These bonds combine the elements of green and social bonds under one label.
Sustainability Link Bonds: Bonds whose financial or structural features are tied to achieving predefined sustainability goals rather than specific projects.
The regulatory emphasis has shifted from broad signalling to audit-level precision. For the 2025-26 reporting cycle, value chain accountability and green finance integrity have become central themes. The top 250 listed entities must now disclose ESG performance across their value chains, extending responsibility beyond internal operations, under the latest SEBI mandate (SEBI circular 2025).
To reduce administrative strain and streamline the transition, SEBI is allowing companies to focus on key partners accounting for 75 per cent of total purchases or sales by value, with a de minimis exemption for those contributing less than 2 per cent.
The evolution of the BRSR Core and related industry standards during 2024 and 2025 has introduced greater rigour and comparability to sustainability reporting. By publishing sector-specific standards, SEBI has standardised methodologies for the nine essential BRSR Core key performance indicators, including greenhouse gas intensity and water footprint, ensuring data is consistent and meaningful for global investors.
The framework also promotes market-based environmental solutions through green credit integration. A new “leadership indicator” under Principle 6 allows organisations to report green credits generated or procured by the entity and its top ten value chain partners, linking national environmental incentives with corporate ESG disclosures.
Overall, the framework aims to enhance transparency, standardise reporting and prevent misuse of ESG labels, thereby strengthening investor confidence in India’s sustainable finance market.
Market, investing and corporate adoption
India’s capital markets are witnessing a paradigm shift as ESG-linked financing becomes increasingly mainstream. Infrastructure and energy companies in particular are turning to ESG bond issuances to tap growing pools of global sustainability-focused capital. Strong demand from international institutional investors is encouraging issuers to align financial strategy with measurable environmental and social outcomes.
The rise of green bonds, sustainability-linked loans and ESG-focused mutual funds indicates that India’s financial system is converging more closely with global sustainable finance benchmarks.
This surge, fuelled by robust demand from international institutional investors, compels issuers to bridge the gap between financial strategy and verifiable environmental and social impacts. The proliferation of green bonds, sustainability-linked loans, and ESG-centric mutual funds confirms that India’s financial architecture is rapidly converging with global sustainable finance benchmarks.
ESG investing in India has transitioned into a high-momentum phase, underpinned by the regulatory rigour of the BRSR framework and heightened investor consciousness. While asset managers expand their portfolios with ESG-themed products, institutional investors are fundamentally recalibrating risk assessments and capital allocation through a sustainability lens.
This shift is mirrored on the corporate front, where sectors such as IT, energy, and financial services are embedding ESG into their strategic DNA, as evidenced by rising commitments to net-zero pathways and inclusive governance. Nevertheless, the ecosystem must still navigate critical headwinds, including data inconsistencies, the need for robust assurance mechanisms, and the pervasive risk of greenwashing.
Looking ahead, ESG in India is expected to become more deeply integrated into business and investment decision-making processes. Key trends likely to shape the landscape include:
Greater emphasis on climate risk management and transition planning
Expansion of green and sustainability-linked finance instruments
Enhanced supply chain due diligence and social compliance
Increased use of digital tools and artificial intelligence in ESG data collection, reporting, and assurance
The gradual tightening of reporting requirements, including the BRSR Core, suggests a move towards more outcome-oriented and comparable ESG disclosures.
Monika Chhimwal is assistant environment officer, NTPC Ltd.
Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth