IFSCA Notifies Framework for Transition Bonds in IFSC
The International Financial Services Centres Authority (IFSCA) issued a circular dated July 29, 2025, introducing the Framework for Transition Bonds to facilitate sustainable financing for hard-to-abate sectors. The move aligns with IFSCA’s broader commitment to promoting ESG-labelled securities and supporting India’s low-carbon transition, especially in GIFT City IFSC.
Bridging the Green Finance Gap
While green and sustainability-linked bonds have successfully mobilized capital for sectors like renewable energy and clean transport, hard-to-abate industries (e.g., steel, cement, shipping) have remained underserved. These sectors account for nearly 40% of global GHG emissions and need long-term funding support for decarbonisation. The Transition Bonds Framework aims to unlock financing for their phased transformation.
Eligible Activities and Transition Plan
Transition Bonds can only be issued if proceeds are used to finance or refinance projects aligned with recognised taxonomies such as the EU Taxonomy, Climate Bonds Taxonomy, IEA Roadmaps, or those notified by India. Issuers must submit a credible transition plan at the entity level, which includes:
• Decarbonisation goals aligned with the Paris Agreement;
• Sector-specific action plans and timelines;
• Quantified targets covering Scope 1 and 2 GHG emissions (Scope 3 encouraged);
• Strong climate governance and board oversight;
• Stakeholder engagement across the value chain;
• Transparent public disclosures and reporting mechanisms.
Independent External Review
Issuers must appoint independent external reviewers to validate their alignment with the Framework. The review may take the form of a Second Party Opinion, Verification, or Certification. Eligible reviewers include registered credit rating agencies and ESG rating providers.
Disclosure and Reporting Requirements
Issuers are required to make detailed initial, additional, and continuous disclosures to IFSC stock exchanges, including:
• Climate strategy, GHG targets, and governance structures;
• Environmental materiality of projects;
• CapEx rollout plans and carbon lock-in assessments;
• Annual progress reports referencing international standards like ISSB;
• Reporting of Scope 3 emissions and use of carbon offsets aligned with VCMI/ICVCM.
Implementation Oversight and Guidance
Issuers are encouraged to align with ICMA’s Climate Transition Finance Handbook and adopt digital tools for real-time MRV (Measurement, Reporting, Verification). The Circular can be accessed here.
