What Are ESG Bonds? L&T First To Declare Rs 500 Crore Green Bond In India

Larsen & Toubro (L&T) has announced a Rs 500 crore ESG bond issuance deal, becoming the first homegrown corporate to do so under the Securities and Exchange Board of India’s (SEBI) freshly introduced (Environmental, Social, and Governance) ESG bond framework.

HSBC is acting as the sole lead arranger in this transaction.

The issuance is compliant with SEBI’s regulatory framework announced on Thursday (5 June), which is designed to promote transparency, accountability, and alignment withinternational ESG standards. The framework outlines key requirements for issuers, including the disclosure of sustainability objectives, mandatory external assessments such as SecondParty Opinions (SPOs), and post-issuance reporting.

What Are ESG Bonds?

ESG bonds have emerged as a key financial instrument to fund projects that address these critical factors. They are part of the broader ESG investment trend, appealing to investors focused on responsible and sustainable finance.  The rapibly growing interest on ESG factors in the investment world has led to a rapid increase in the issuance of ESG bonds.

Unlike well-known bonds, ESG bonds are linked directly to the issuer's ability to generate positive environmental or social outcomes or adhere to strong governance practices.

L&T's ESG bond mandates clear Key Performance Indicators (KPIs) and targets to measure ESG outcomes, crucial steps in supporting India’s net-zero and climate-resilient growth agenda.

As part of the deal, L&T aims to meet its environmental targets, including a decrease in intensity of fresh water withdrawal and emissions of greenhouse gases. These initiatives are in line with the company’s long-term sustainability goals of achieving waterneutrality by 2035 and carbon neutrality by 2040.

“We take pride in leading the transition to sustainable finance under SEBI’s new ESG framework,” said a senior spokesperson from L&T.

“This bond issuance reinforces our steadfast commitment to sustainable development and responsible business practices while aligning our finances with environmental targets, ” the company official said. 

Speaking on the same, HSBC India said,“We are pleased to partner with L&T on the first INR Sustainability Linked Bond under SEBI's guidelines, reinforcing our commitment to supporting the Clean Energy Transition in India. We look forward to partnering with corporates across sectors looking to navigate the paths toward their sustainability goals."