What are social bonds? SEBI's 2025 ESG framework

Social bonds are the part of India's sustainable finance rulebook that has nothing to do with carbon. A social bond raises money for projects that address a social problem, and until recently India had no operational framework for them at all. That changed with a SEBI circular dated 5 June 2025, which added Chapter IX-C to the debt master circular and defined social bonds, sustainability bonds and sustainability-linked bonds together. This guide covers what social bonds are, which projects qualify, what the issuer discloses, and what SEBI calls purpose-washing. It is not investment advice.

What are social bonds and where do the rules come from?

The legal hook came first. A SEBI amendment notification dated 11 December 2024 inserted Regulation 2(1)(oa) into the NCS Regulations, 2021, creating the umbrella term Environment, Social and Governance Debt Securities, defined as green debt securities, social bonds, sustainability bonds, sustainability-linked bonds, or any other bonds issued in accordance with international frameworks adapted to suit Indian requirements. Regulation 12A then says an issuer of ESG debt securities complies with such conditions as SEBI specifies.

The conditions arrived on 5 June 2025, as Chapter IX-C of the Master Circular for issue and listing of non-convertible securities, securitised debt instruments, security receipts, municipal debt securities and commercial paper. The consolidated version of that circular is dated 15 October 2025.

There is a gate before the categories. A debt security may be labelled a social bond only if the proceeds fund projects aligned with a recognised standard, and Chapter IX-C names five: the International Capital Market Association principles or guidelines, the Climate Bonds Standard, ASEAN Standards, European Union Standards, and any framework or methodology specified by a financial sector regulator in India.

Which projects qualify as social projects?

Six categories, each with examples printed in the circular.

1. Affordable basic infrastructure, for example clean drinking water, sewers, sanitation, transport and energy.
2. Access to essential services, for example health, education and vocational training, and healthcare.
3. Affordable housing.
4. Employment generation, including programmes designed to prevent or alleviate unemployment stemming from socioeconomic crises, climate transition projects, or other considerations for a just transition. The circular notes this can include SME financing and microfinance.
5. Food security and sustainable food systems, described as physical, social and economic access to safe, nutritious and sufficient food, resilient agricultural practices, reduction of food loss and waste, and improved productivity of small-scale producers.
6. Socioeconomic advancement and empowerment, described as equitable access to and control over assets, services, resources and opportunities, and equitable participation and integration into the market and society, including reduction of income inequality.

SEBI may add categories later.

What happens when a project is both green and social?

The circular addresses the overlap directly rather than leaving it to practice. Certain social projects may have environmental co-benefits, and certain green projects may have social co-benefits. The classification of a security as a green debt security, a social bond or a sustainability bond is determined by the issuer, based on its primary objectives for the underlying projects. The green side of that boundary is set out in what are green debt securities.

Where the issuer does not want to choose, the sustainability bond exists for exactly that case: it funds a combination of eligible green projects and social projects. An issuer of sustainability bonds complies with both the green debt securities chapter and the social bond annexure, so the disclosure burden is additive rather than averaged.

What does a social bond issuer disclose?

Initial disclosures in the offer document, under Annexure IX-C-A Part I, cover the social objectives including the target population and intended benefits; the decision-making process for evaluating and selecting projects; the taxonomies, standards or certifications referenced; the system for tracking where the proceeds go, for which the issuer may form a sustainability or ESG committee; the projects or areas to be funded including refinancing; an indicative split between financing and refinancing; how unallocated proceeds will be parked; the perceived social risks with a mitigation plan; and, in the case of refinancing, details of the existing debt including the amount outstanding.

Continuous disclosures go with the annual report and financial results. Use of proceeds is verified by an external auditor's report covering the internal tracking method and the allocation of funds. Unutilised proceeds are reported for each ISIN. The annual report carries the list of projects with amounts disbursed and expected impact, qualitative and where feasible quantitative social impact measures, the methods and assumptions behind them, and the deployment of the risk mitigation plan. Impact reporting is project by project. Where confidentiality agreements block project-level detail, the circular permits generic or aggregated portfolio reporting, for example the percentage allocated to a project category.

An issuer eligible to list on the SME exchange, as defined in the SEBI ICDR Regulations, 2018, makes these continuous disclosures on a bi-annual basis.

What is purpose-washing?

Greenwashing has an established name. SEBI coined the social equivalent in the same chapter, defining purpose-washing in a footnote as making false, misleading, unsubstantiated or otherwise incomplete claims about the purpose for which bonds are issued.

The seven duties that follow mirror the greenwashing chapter almost clause for clause. The issuer continuously monitors whether operations are actually reducing adverse social impact as envisaged in the offer document. It does not use proceeds outside the permitted categories. If misuse comes to light on bonds already issued, it discloses that to investors and, if a majority of debenture holders require it, undertakes early redemption. It does not use misleading labels, hide trade-offs or cherry-pick research data. It maintains standards consistent with the rating assigned, a scale explained in what is a credit rating. It quantifies the negative externalities of the fund utilisation. And it makes no untrue claim of third-party certification. The green-side version of the same discipline is in how to spot greenwashing in green bonds.

Every social bond appoints an independent third-party reviewer or certifier, independent of the issuer and its key managerial personnel, remunerated so as to prevent conflicts of interest, and with expertise in assessing ESG debt securities. A SEBI-registered ESG rating provider may take that role.

Social bonds are the newest label in India's listed debt market and the one with the least established reporting history, which makes the offer document and the first annual report the whole of the available record. Flock reports public regulatory filings with every claim sourced and dated. What any of it means for your money is your call to make.