How to spot greenwashing in green bonds: SEBI's rules

Knowing how to spot greenwashing in green bonds in India is less a matter of judgement than of reading the right paragraphs. SEBI wrote a chapter specifically on it, and that chapter lists seven duties an issuer of green debt securities has to meet. Each duty maps to something checkable in the offer document, the annual report, or an exchange filing. This guide walks the list, says where each item is disclosed, and flags a documentation trap that produces false readings. It is not investment advice.

Why SEBI wrote a greenwashing chapter

The framework for green debt securities was reviewed in February 2023, with consequential changes made to the NCS Regulations by gazette notification dated 2 February 2023. During the consultation, comments and representations from market participants, and particularly from investors, raised concerns about greenwashing. Chapter IX-A is the response, and it is unusually direct: it concedes that no universally accepted taxonomy of greenwashing exists, then sets out seven obligations anyway.

The base framework those obligations attach to is covered in what are green debt securities.

The seven duties, and where to check each one

1. Continuous monitoring of actual impact. While raising funds for a transition to a greener pathway, the issuer must continuously check whether the path being taken is actually reducing adverse environmental impact and contributing to a sustainable economy as envisaged in the offer document. Check it against the annual report, which carries qualitative performance indicators and, where feasible, quantitative measures of environmental impact, plus the methods and key assumptions used to prepare them. An impact section with no assumptions disclosed is not compliant with the underlying Chapter IX requirement.

2. No use of proceeds outside the definition. Funds raised through green bonds may not be used for purposes falling outside the definition of green debt security in the NCS Regulations. Check it against the externally audited utilisation report. Chapter IX requires utilisation of proceeds to be verified by an external auditor's report covering both the internal tracking method and the allocation of funds to projects, and requires unutilised proceeds to be reported for each ISIN separately.

3. Disclosure and possible early redemption if misuse emerges. Where an instance under duty 2 comes to light on green debt securities already issued, the issuer must disclose it to investors and, if required by a majority of debenture holders, undertake early redemption of those securities.

4. No misleading labels, hidden trade-offs or cherry-picked data. The issuer may not use misleading labels, hide trade-offs, or cherry-pick data from research to highlight green practices while obscuring unfavourable ones. This is the duty that is hardest to verify from a single document and easiest to verify across two. Compare the impact section of the annual report against the Business Responsibility and Sustainability Reporting tables required by Annexure IX-A, which cover energy consumption and intensity, water withdrawal and discharge, air emissions including NOx, SOx and particulate matter, Scope 1 and Scope 2 greenhouse gas emissions, waste by category, operations in or around ecologically sensitive areas, and environmental law non-compliances with fines and corrective action. Those tables are entity-level and adversarial to a cherry-picked project narrative. The framework is explained in what is BRSR and the assured subset in what is BRSR Core.

5. Standards consistent with the assigned rating. The issuer must maintain the highest standards associated with the issue of a green debt security while adhering to the rating assigned to it. The rating scale itself is covered in what is a credit rating.

6. Quantified negative externalities. The issuer must quantify the negative externalities associated with utilisation of the funds raised. This one is worth searching for by name, because a green bond disclosure that reports only benefits has skipped an express obligation. Chapter IX separately requires disclosure of perceived social and environmental risks with a mitigation plan in the offer document, and details of the deployment of that mitigation plan in the annual report.

7. No untrue claims of third-party certification. The issuer may not make untrue claims giving a false impression of certification by a third-party entity.

The reviewer requirement changed on 27 February 2026

Duty 7 became easier to test once the underlying appointment stopped being optional.

Until early 2026, Chapter IX paragraph 1.8 required appointment of an independent third-party reviewer or certifier on a comply-or-explain basis, meaning an issuer could instead explain in its annual report why it had not complied and what steps it had taken. By circular dated 27 February 2026, SEBI deleted paragraph 1.8 and inserted a new paragraph 5, applicable with immediate effect. The stated reason was alignment with the reviewer requirements set for social and sustainability bonds by the circular dated 5 June 2025.

The new paragraph requires the issuer to appoint an independent third-party reviewer or certifier to ascertain that the issuance accords with the Regulation 2(1)(q) definition, including review or certification of the processes, project evaluation and selection criteria, and eligible project categories. Three conditions attach: the reviewer must be independent of the issuer, its directors, senior management and key managerial personnel; must be remunerated in a way that prevents any conflict of interest; and must have expertise in assessing ESG debt securities. The scope of the review must be specified in the offer document, the review may take the form of a second party opinion, verification, certification, or a scoring or rating, and the reviewer's details must be disclosed in the offer document.

So the checks on duty 7 are concrete. Is a reviewer named in the offer document? Is the scope of its review stated there? Does the form of review match one of the four ICMA-recognised forms, and is the claim being made in marketing the same as the one in the document?

The documentation trap

One practical warning, because it produces confident wrong readings on this exact topic.

India's consolidated regulations print their own superseded text inline, in footnotes, immediately beneath the provisions that replaced them. In the NCS Regulations, the nine-category pre-2023 definition of green debt security sits in a footnote directly under the current thirteen-category clause, in the same numbering style. Two differences trip people up. Sustainable water management was a standalone category in the old list and now sits inside the blue bonds category. And the old first category read "renewable and sustainable energy including wind, solar, bioenergy"; the current one drops solar, which moved to the yellow bonds category.

Reading a paragraph without checking whether it is body text or a footnote means testing an issuer against a rule that stopped applying on 2 February 2023. The same applies to the master circular, whose current consolidated version is dated 15 October 2025 and which prints substituted clauses in footnotes throughout.

The social equivalent

SEBI extended the same discipline beyond the environment on 5 June 2025. Chapter IX-C introduces purpose-washing, defined as making false, misleading, unsubstantiated or otherwise incomplete claims about the purpose for which bonds are issued, and applies a near-identical seven-duty list to social bonds and sustainability bonds. That framework is covered in what are social bonds, and the target-linked instrument that fails in a different way in green bonds vs sustainability-linked bonds.

Knowing how to spot greenwashing in green bonds comes down to reading four documents against each other: the offer document's project and risk disclosures, the externally audited utilisation report, the entity-level BRSR tables, and the named reviewer's scope. Flock reports public regulatory filings with every claim sourced and dated. What any of it means for your money is your call to make.