ESGGreenwashing in India: under the guise of Green Debt Securities

April 14, 20230


The phrase “Greenwashing” first appeared in the 1960s. Greenwashing is basically a tactic used by companies to deceive their consumers in believing that their products and services are environmentally friendly, in order to tap into the growing concern of the consumers of being environmentally for their personal benefit.

In India the awareness with respect to ESG have increased recently. Companies have now started issuing Green Debt Securities (“GDS”), as a way to raise funds to invest in non-convertible securities defined under SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“ILNCS Regulations)” that are wind, solar, and bioenergy. Investing in public transportation, energy efficient buildings, biodiversity conservation, sustainable waste management, to position themselves as responsible and sustainable businesses.

However, with the increase in awareness of ESG in India, the problem with respect to Greenwashing is also rising and the major reason for rise of Greenwashing in India is lack of a robust regulation in India. The Securities and Exchange Board of India (“SEBI”) in order to curb Greenwashing in India has vide circular no. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/023, dated 6th February, 2023 enhanced the disclosures to be made by the company at the time of issuance of GDS.

In this blog, we intend to discuss what GDS is and the revised regulatory framework issued by SEBI for curbing Greenwashing in India.


The amended Regulatory framework issued by SEBI for issuance of GDS in India is applicable to all issuances of GDS in India on or after 02.02.2023.

However, the enhanced disclosure requirements applicable for curbing Greenwashing are applicable on issuances of GDS launched on or after 01.04.2023. The previous disclosure requirements will continue to apply to past issuances whose proceeds have not been fully utilized.

Further, it has to be keep in mind that the regulatory framework which is mentioned is only applicable to such issuances of GDS that are intended to be listed on the stock exchanges in India. In case of GDS issuances that are planning to be listed on international markets, the general compliances related to bonds issuance as per the Companies Act, 2013 and Special compliances which are applicable in the jurisdiction in which such bonds are intend to be listed, should apply.


GDS are a type of debt security that is limited to the categories of projects explicitly provided in the definition under Reg 2(1) of ILNCS Regulations. The definition is exhaustive, meaning that no other category of project falls under GDS unless it is specifically included in the definition.

However, the SEBI vide amended have now added new categories of projects and assets that fall under GDS, including climate change adaptation, pollution prevention and control, circular economy adapted products, and eco-efficient products.

These new categories encompass efforts to make infrastructure more resilient to climate change, information support systems, reducing air emissions, greenhouse gas control, waste reduction, and the design of reusable and eco-efficient products.

The newly added categories of projects for GDS issuance are consistent with both the Green Bond Principles and India’s commitments towards achieving net-zero targets.


A. Appointment of an Independent Third Party Reviewer/ Certifier

Under the previous requirements, at the time of issuance of GDS, the companies had to disclose the details of any independent third party reviewer or certifier that they had appointed, and an external auditor was needed to verify the utilization of GDS proceeds.

This verification process confirmed that the funds had been allocated correctly to the specified projects/assets.

However, the SEBI in order to enhance the transparency has vide Circular made it mandatory for GDS issuers to appoint an independent third party reviewer/certifier and disclose the appointment in the offer document.

The independent third party reviewer/certifier is needed for two main purposes: Pre-issue support and Post-issue support.

1. Pre-issue support: The reviewer/certifier will evaluate and certify the processes for project selection criteria and identify which project categories are eligible for GDS financing.

2. Post-issue support: The reviewer/certifier will manage the use of GDS proceeds and verify the internal tracking and impact reporting.

The Operational Circular does not lay out any specific criteria that an independent third party reviewer must meet in order to be appointed,  as long as the reviewer possesses the required technical knowledge and expertise to perform the necessary functions, they are considered qualified.

ICMA provides a list of external reviewers on their website who have confirmed their willingness to align with ICMA’s voluntary Guidelines for External Reviewers, but this list is not endorsed by ICMA. The Climate Bonds Standards Board has also approved a list of verifier organizations, which can be accessed on their website.

B. Widening Disclosures Requirements

The unique nature of GDS requires additional disclosures by the issuer in the offer document, beyond what is typically required for regular debt securities. Furthermore, since public funds are involved, the issuer has an ongoing responsibility to report the use of proceeds in compliance with the offer document’s terms.

These ongoing disclosures must be included in the issuer’s annual report and/or financial statements, as stipulated in Chapter IX of the Operational Circular. The disclosure requirements have been revised to conform to the Green Bond Principles, as recommended in the Consultation Paper.

The amended disclosures include the following:

  • Details of decision-making process followed for determining eligibility of project(s).
  • Details related to the perceived social and environmental risks and proposed mitigation plan associated with the project(s) proposed to be financed/ refinanced through GDS proceeds.
  • Impact Reporting.
  • Disclosures of major elements of BRSR.

C. Regulation of Greenwashing

Greenwashing refers to the act of diverting funds from green bonds to projects that do not provide any significant environmental benefits or may even have negative impacts. This can involve exaggerating the environmental benefits of a product or service, selectively presenting positive information while ignoring negative information, or using vague or unverifiable language to imply environmental benefits.

Greenwashing can be harmful as it misleads consumers and investors into thinking they are supporting environmentally-friendly practices when in fact they are not. It is important for companies to provide transparent and accurate information about their environmental practices to avoid the negative effects of greenwashing.

The SEBI has expressed concerns about the misuse of green bonds by issuers in their Consultation Paper. Such actions may also pose a significant reputational risk for investors who are interested in socially responsible investments that focus on Environmental, Social, and Governance (ESG) practices.

The SEBI in order to curb the practice of Greenwashing in India under the guide of issuance of GDS has issued Dos and Don’ts related to GDS to be complied by the company at the time of issuance of GDS. The said circular is aimed at ensuring that such practices are avoided.

This requires the issuer of GDS to comply the following requirements:

  • The first requirement is to consistently monitor whether the actions taken to achieve a more sustainable form of operations are effectively reducing the negative environmental impact and promoting a sustainable economy, as described in the offer document.
  • The second requirement prohibits the use of GDS funds for any purpose that does not fit the definition of a Green Debt Security, including temporary placement of the proceeds.
  • The third requirement prohibits the use of misleading labeling, hiding unfavorable trade-offs, or selectively presenting data to highlight green practices while obscuring negative information.
  • The fourth requirement demands the maintenance of the highest standards for GDS issuance, while adhering to the assigned rating.
  • The fifth requirement involves the quantification of the negative externalities associated with the use of GDS proceeds.
  • The sixth requirement prohibits making untrue claims and giving false impressions of certification by a third-party entity.


Greenwashing is a serious problem in India, as it undermines consumer trust in the company. Therefore, the circulars issued by SEBI for green debt securities is a crucial step forward. However, it addresses only one side of the coin. There are still a plethora of shortcomings that await appropriate address and regulation by the government.

There is an urgent need for a robust legal framework to ensure that companies that make inaccurate environmental claims are held accountable and face significant penalties to cause a deterrence effect. Additionally, there is a need for better consumer education and awareness about the issue of Greenwashing and how to identify it.


For any query or feedback, please feel free to get in touch with or

© 2020-21 AMLEGALS Law Firm in Ahmedabad, Mumbai, Kolkata, New Delhi, Bengaluru for IBC, GST, Arbitration, Contract, Due Diligence, Corporate Laws, IPR, White Collar Crime, Litigation & Startup Advisory, Legal Advisory.


Disclaimer & Confirmation As per the rules of the Bar Council of India, law firms are not permitted to solicit work and advertise. By clicking on the “I AGREE” button below, user acknowledges the following:
    • there has been no advertisements, personal communication, solicitation, invitation or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
    • user wishes to gain more information about AMLEGALS and its attorneys for his/her own information and use;
  • the information about us is provided to the user on his/her specific request and any information obtained or materials downloaded from this website is completely at their own volition and any transmission, receipt or use of this site does not create any lawyer-client relationship; and that
  • We are not responsible for any reliance that a user places on such information and shall not be liable for any loss or damage caused due to any inaccuracy in or exclusion of any information, or its interpretation thereof.
However, the user is advised to confirm the veracity of the same from independent and expert sources.