Latest news with #ESG-labelled
Mint
6 days ago
- Business
- Mint
L&T's ESG bond debut may open India's sustainable debt market—if investors stay interested
Mumbai: On 23 June, infrastructure giant Larsen & Toubro (L&T) listed India's first environmental, social & governance (ESG) bond on the National Stock Exchange under Sebi's new framework. While Indian companies have previously raised ESG debt overseas, L&T's rupee-denominated issuance is a domestic first under Sebi's guidelines. Experts believe the ₹750 million sustainability-linked bond (SLB), anchored by HSBC and offering a 6.35% coupon (competitive by market standards) suggests that investors are willing to back credible ESG-labelled issuances. But whether this debut sparks a broader trend or remains an isolated milestone hinges on a critical factor: investors' willingness to pay the 'greenium" – the difference between the yield or returns investors receive from a green bond versus a similar conventional bond. 'The primary factor will be investor interest and their willingness to offer a green or ESG premium to the bond issue compared to other fixed-income instruments," said Bose Varghese, senior director-ESG at Cyril Amarchand Mangaldas. 'Demand for rupee-denominated ESG bonds has been lukewarm because of the issuers' expectation of a 'green premium' and investors' lack of interest to offer that. But L&T has done it. We can expect more to follow", he said. Global vs local demand Globally, ESG-labelled instruments from Indian companies have seen strong demand. In 2015, Exim Bank issued a $500-million green bond, followed by Axis Bank in 2016. But in India, listed green bond issuance, including municipal bonds, stood at just ₹6,953 crore as of March 2025, according to Sebi data collated by ICRA ESG Ratings Ltd. According to data cited by Nikhil Aggarwal, CEO of investment platform Grip Invest, green bonds outperformed conventional bonds by nearly 2% in 2024. 'The positive response from institutional investors highlights strong demand, which will be critical for future issuances," said Aggarwal. R. Shankar Raman,president, whole-time director & chief financial officer (CFO) at L&T, told Mint the company aims to encourage responsible finance as a strategic pillar. 'We received interest from reputed investors and arrangers who were aligned with the ESG theme. The issuance also enabled us to secure beneficial pricing, reflecting the positive market sentiment toward credible sustainability-linked offerings," he said. Data from Prime Database showed thatIndia's green bond market saw 27 issues totalling ₹8,743 crore between FY21 and FY25. The highest was in FY22, when ₹2,677 crore was raised across 10 issues. Only two issues, worth ₹700 crore, have been recorded so far in FY26. Sebi's ESG bond framework Sebi's 5 June circular introduced a framework covering green, social, sustainability, and sustainability-linked bonds. It mandated KPI-linked disclosures and third-party verification. 'While the framework is robust, its effectiveness will depend on the independence and reputation of the third party hired," said Varghese. 'L&T has long-standing sustainability targets, including carbon and water neutrality," said Heena Khushalani, partner, climate change and sustainability services, EY India. 'For a company with strong internal momentum on ESG and measurable long-term targets, this instrument is flexible and a logical step," she added. Khushalani also pointed out that SLBs often include coupon rate adjustments based on the achievement of sustainability targets. 'If attractive coupon rates—like the 6.35% in L&T's case—become a trend, it'll incentivise more issuers," she said. To be clear, among green bonds with a three-year tenure, Avaada Solaris and Clean Sustainable Energy offer a 6.75% coupon rate, according to data from Prime Database. Still, a shortage of qualified reviewers in India could delay issuances. 'This could create bottlenecks in timely issuance and validation," Aggarwal warned. Khushalani said, 'Sebi, NSE, or platforms like GIFT City could jointly issue guidelines or empanel competent verifiers to mitigate greenwashing risks." The push for sustainable finance is likely to grow, especially among large firms with net-zero commitments. Experts said the Sebi framework has brought regulatory clarity and boosted investor confidence. 'As successful examples emerge, more corporates are likely to explore ESG bonds, not just as a funding tool but as a strategic instrument to align with global investor expectations," said L. Shivakumar, CEO of ICRA ESG Ratings Ltd. Shivakumar also highlighted India's proposed draft climate finance taxonomy, aimed at bringing consistency to ESG disclosures by aligning them with global standards. 'It will provide a structured classification system that enables better comparability and tracking of outcomes," he added. Smaller firms could struggle Despite policy momentum, experts said smaller firms could struggle to participate in the ESG debt market owing to high compliance costs, limited visibility, and weaker secondary-market liquidity. 'So far we have seen only large, reputed Indian corporations issuing ESG-labelled bonds," said Varghese. 'For smaller companies with smaller fund requirements, issuance costs may prove significant." Indian Renewable Energy Development Agency Limited issued a 10-year bond for ₹590 crore in 2019 and Dme Development Limited issued a 10-year bond for ₹775 crore in 2024. An analyst at a rating agency said, 'The real test will be how effectively Sebi ensures enforcement and prevents greenwashing. Without that, the credibility of the entire market is at stake."
Economic Times
25-06-2025
- Business
- Economic Times
IFSCA unveils framework for ESG-linked transition bonds at GIFT City
International Financial Services Centres Authority introduces a framework. This framework allows companies facing carbon emission reduction challenges to secure funds at Gift City. They can do this through Environment, Social, and Governance-linked bonds. The framework focuses on sectors like steel and aviation. It requires a credible transition plan and enhanced disclosures. Tired of too many ads? Remove Ads (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of .) 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 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 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 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 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 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
Time of India
25-06-2025
- Business
- Time of India
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. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Villa For Sale in Dubai Might Surprise You Villas in Dubai | Search ads Learn More Undo 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. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Bonds Corner Powered By Browse all Bonds News with 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. Live Events 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 .
Time of India
19-06-2025
- Business
- Time of India
India's Larsen & Toubro may explore another ESG bond issue after debut attracts premium, spokesperson says
Indian infrastructure major Larsen & Toubro could raise funds through environmental, social and governance bonds again, after its first-ever issuance of the notes was sold at a premium, a company spokesperson said on Wednesday. In the debut bond sale under India's newly-introduced ESG debt securities framework, L&T on Wednesday raised 5 billion rupees ($58 million) through three-year notes at a coupon of 6.35%. This compares with 6.45%-6.50% secondary market yields on the company's near three-year bonds, according to merchant bankers. Bonds Corner Powered By India's Larsen & Toubro may explore another ESG bond issue after debut attracts premium, spokesperson says In the debut bond sale under India's newly-introduced ESG debt securities framework, L&T on Wednesday raised 5 billion rupees ($58 million) through three-year notes at a coupon of 6.35%. Indian bond yields marginally higher; focus on oil, debt supply Sebi eases norms for foreign investors who only buy government bonds Lending yields set to shrink in FY26 as banks play it safe Jiraaf launches India's first Bond Analyser to decode fixed-income investing Browse all Bonds News with "We remain open to raising more funds through ESG-linked issuances...," the spokesperson told Reuters. "Should the need arise, and if market conditions are conducive, we may consider the ESG debt market again." The notes, rated AAA by Crisil, saw banks and mutual funds as investors, the spokesperson said. Live Events SBI Mutual Fund was the anchor investor and bought at least 750 million rupees of the bonds, bankers said. The fund house did not reply to a Reuters email seeking comment. "We were able to achieve beneficial pricing on this ESG bond issuance compared to our plain vanilla bonds. The strong investor interest in credible ESG-labelled instruments helped us price the bond attractively," the L&T spokesperson said. The deal signals that credible ESG-labelled issuances can secure premium pricing purely on the strength of transparency and investor confidence, said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap. "Going ahead, this could open the gates for more corporates to access the ESG bond market, and issuers with strong sustainability credentials may benefit from favourable pricing." ETMarkets WhatsApp channel )
Economic Times
19-06-2025
- Business
- Economic Times
India's Larsen & Toubro may explore another ESG bond issue after debut attracts premium, spokesperson says
Indian infrastructure major Larsen & Toubro could raise funds through environmental, social and governance bonds again, after its first-ever issuance of the notes was sold at a premium, a company spokesperson said on Wednesday. ADVERTISEMENT In the debut bond sale under India's newly-introduced ESG debt securities framework, L&T on Wednesday raised 5 billion rupees ($58 million) through three-year notes at a coupon of 6.35%. This compares with 6.45%-6.50% secondary market yields on the company's near three-year bonds, according to merchant bankers. "We remain open to raising more funds through ESG-linked issuances...," the spokesperson told Reuters. "Should the need arise, and if market conditions are conducive, we may consider the ESG debt market again." The notes, rated AAA by Crisil, saw banks and mutual funds as investors, the spokesperson said. SBI Mutual Fund was the anchor investor and bought at least 750 million rupees of the bonds, bankers said. The fund house did not reply to a Reuters email seeking comment. ADVERTISEMENT "We were able to achieve beneficial pricing on this ESG bond issuance compared to our plain vanilla bonds. The strong investor interest in credible ESG-labelled instruments helped us price the bond attractively," the L&T spokesperson said. The deal signals that credible ESG-labelled issuances can secure premium pricing purely on the strength of transparency and investor confidence, said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap. ADVERTISEMENT "Going ahead, this could open the gates for more corporates to access the ESG bond market, and issuers with strong sustainability credentials may benefit from favourable pricing." (You can now subscribe to our ETMarkets WhatsApp channel)
