SPOs launched to strengthen credibility of ESG debt market

New Delhi [India], August 18 : Second Party Opinions (SPOs) have emerged as a key instrument to ensure that environment, social and governance (ESG)-labelled bonds and loans meet global standards and remain credible in the eyes of investors. According to a report by ICRA ESG Ratings Limited, SPOs are designed to provide an independent assessment of an issuer's ESG debt framework, strengthening transparency, curbing risks of greenwashing, and building confidence in sustainable finance.

The development comes on the heels of a Securities and Exchange Board of India (SEBI) circular issued in June 2025, which requires issuers of ESG debt securities, including social bonds, sustainability bonds, and sustainability-linked bonds, to appoint independent third-party reviewers or certifiers. These reviewers are tasked with verifying compliance with recognized standards, evaluating project selection processes, and validating the use of proceeds and impact reporting.

Announcing the launch of its SPO service, ICRA ESG Ratings said the framework will assess the integrity of sustainability claims made by issuers. "By rigorously evaluating an issuer's ESG frameworkincluding its use of proceeds, governance mechanisms, and alignment with international standardsICRA ESG helps issuers demonstrate the integrity of their sustainability commitments. SPOs also empower investors with the confidence that their capital is being directed toward genuinely sustainable initiatives, mitigating risks of greenwashing and enhancing trust in the ESG debt market," said Sheetal Sharad, chief rating officer at ICRA ESG Ratings.

The ICRA ESG Ratings report highlighted that ESG debt issuance in India, covering green, social, sustainability, and sustainability-linked bonds and loans, stood at USD 15.6 billion in 2024. Cumulatively, the ESG-aligned debt volume has reached USD 55.9 billion, marking a 186 per cent surge since 2021. While green bonds continue to dominate, accounting for 83 per cent of total aligned issuance, the market is diversifying rapidly with new instruments and issuer types.

Sharad added that the role of SPOs in sustainable finance is expected to expand further. "The market for Second Party Opinions in sustainable finance is expected to grow steadily, driven by increasing demand for transparency, credibility in ESG assessments, and evolving regulatory frameworks," she said.

An SPO, the report explained, is a one-time exercise that remains valid until the underlying debt financing framework undergoes changes. By creating an additional layer of scrutiny, it is expected to bolster trust in ESG debt markets at a time when global investors are paying closer attention to sustainability-linked investments.

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