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Transition bonds would not only assist issuers from hard-to-abate sectors to raise capital but shall also bring credibility amongst investors by ensuring adequate disclosures, independent external review, etc. to mitigate the risk of greenwashing.
The International Financial Services Authority (IFSCA) has approved a framework for issuance and listing of transitions bonds in GIFT IFSC in Gujarat to help companies in hard-to-abate sectors like steel, cement, heavy duty transport, aviation and shipping to raise funds.
“The said framework will enable the companies, specifically from hard-to-abate sectors, to raise capital and list their securities at GIFT IFSC, while committing to a credible transition plan and making enhanced disclosures to ensure the interests of the investors are protected,” said IFSCA after formally approving the framework at meeting held on Tuesday. “Transition finance provides a structured pathway for hard-to-abate industries to reduce their emissions progressively,” it added.
While ESG labelled debt securities have played a key role in mobilising climate finance, it is generally seen that their application is often limited to sectors/projects that are at near/net zero. A larger portion of green debt volume is directed primarily towards energy, buildings and transport sectors.
Instruments such as transition bonds hold significant potential in mobilising capital for decarbonisation, particularly in high-emitting industries in developing countries such as India. Transition finance will provide a structured pathway for industries in hard-to-abate sectors to reduce their emissions progressively by enabling investments in cleaner technologies, processes and alternative fuels.
The framework for transition bonds was prepared based on the recommendations of the Expert Committee on Climate Finance set up by the IFSCA, comments made by the public in response to a consultation paper, analysis of the global development on the subject and not losing sight of the needs of developing countries such as India.
The important pillars of this framework include a credible transition plan at the entity level, alignment with globally recognised taxonomies and technology road-maps, mechanism for independent external review and disclosure requirements (Initial & Annual).
Transition bonds would not only assist issuers from hard-to-abate sectors to raise capital but shall also bring credibility amongst investors by ensuring adequate disclosures, independent external review, etc. to mitigate the risk of greenwashing.
Published on June 26, 2025
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