IFSCA releases framework for transition bonds at GIFT City
This story was originally published at 12:22 IST on 30 July 2025
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NEW DELHI – The International Financial Services Centres Authority on Tuesday issued a framework for transition bonds, recognising the same as Environment, Social and Governance-labelled debt securities. Transition bonds are issued to raise long-term capital for high emissions industries to transition to less carbon-intensive operations.
In April, the regulator had released a consultation paper on framework for transition bonds. Under the final framework, debt securities will be labelled as transition bond and be eligible to be issued and listed on a recognised stock exchange in the IFSC, only if the funds raised under it are proposed to be utilised for financing or refinancing projects. Assets classified as 'transition' under ASEAN Taxonomy for Sustainable Finance, Australian Sustainable Finance taxonomy, Climate Bonds Taxonomy, among other taxonomies approved by the IFCSA will also be labelled as transition bonds by the regulator.
Further, an issuer of the said debt security is required to have a credible transition plan at the entity level. The transition plan is required to outline clear emission reduction milestones within specified timeframes and be aligned with the Paris Agreement's goal to limit global temperature rise to well below 2 degrees Celsius above pre-industrial levels, with efforts to keep it within 1.5 degrees Celsius.
"Transition plan shall detail a comprehensive decarbonisation strategy, supported by concrete and sector-specific actions to achieve emissions reduction. This shall include a clear articulation of technology deployment, operational changes, investment plans, and indicative timeline(s) for phasing out high-emission assets, if possible," the regulator said. The transition plan is also required to have quantified, time-bound greenhouse gas reduction targets, as well as strong governance and stakeholder and value chain engagement, IFSCA said.
A transition bond issuer is also required to appoint independent external reviewer to confirm that the proposed issuance of transition bond is in alignment with the framework. The issuer is also expected to make relevant disclosures related to the transition plan's governance, business model environmental materiality, it said.
The issuer is also required to report progress against climate transition strategy, which covers details of annual green house gas emissions reduction, progress on committed green house gas emission reduction targets and percentage of capital expenditure allocated to green house gas emission reduction projects out of total capital expenditure made. End
Reported by Pratiksha
Edited by Akul Nishant Akhoury
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