IFSCA unveils framework for ESG-linked transition bonds at GIFT City

The International Financial Services Centres Authority has issued a framework that will enable companies that face difficulty in reducing carbon emissions to raise funds at Gift City through Environment, Social and Governance (ESG)-linked bonds.

The unified regulator issued Tuesday a framework for issuance and listing of the so-called transitions bonds. “The said framework will enable the issuers, specifically from hard-to-abate sectors, to raise capital and list their securities at GIFT IFSC, while committing to a credible transition plan and making enhanced disclosures to ensure the interests of the investors are protected,” it said.

Industries such as steel, cement, aviation are classified as hard-to-abate. Companies from these sectors particularly find it difficult to reduce carbon emission because of their heavy reliance on fossil fuels and processes that make decarbonization difficult.


ISFCA noted that ESG-labelled debt securities have played a key role in mobilizing climate finance. But it is generally seen that their application is often limited to sectors/projects that are at near/net zero. “Transition finance provides a structured pathway for hard-to-abate industries to reduce their emissions progressively,” it said.

The framework has four important pillars. These are a credible transition plan at the entity level, alignment with globally recognized taxonomies and technology roadmaps, mechanism for independent external review, and disclosure requirements.

Last week, infrastructure conglomerate Larsen & Toubro raised ESG-compliant bonds amounting to Rs500 crore for a term of three years. This is the first such bond issue under the Securities and Exchange of India’s (Sebi) newly issued framework on ESG and sustainability-linked bonds.