L&T ESG bond debut signals backing for quality issuances

The push for sustainable finance may grow among large firms with net-zero commitments

- Abirami Sekar & Neha Joshi

On June 23, infrastructure giant Larsen & Toubro (L&T) listed India's first environmental, social, and governance (ESG) bond on the National Stock Exchange under Sebi's new framework. While Indian companies have previously raised ESG debt overseas, L&T's rupee-denominated issuance is a domestic first under Sebi's guidelines.

Experts believe the ₹750 million sustainability-linked bond (SLB), anchored by HSBC and offering a 6.35% coupon (competitive by market standards), suggests that investors are willing to back credible ESG-labelled issuances.

But whether this debut sparks a broader trend or remains an isolated milestone hinges on a critical factor: investors' willingness to pay the "greenium"—the difference between the yield or returns investors receive from a green bond versus a similar conventional bond.