Mumbai, June 28 -- On 23 June, 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 Securities and Exchange Board of India's (Sebi) guidelines. Experts believe the Rs.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. "The primary factor will be investor interest and their willingness to offer a green or ESG premium to the bond issue compared to other fixed-income instruments," said Bose Varghese, senior director, ESG at Cyril Amarchand Mangaldas. "Demand for rupee-denominated ESG bonds has been lukewarm because of the issuers' expectation of a 'green premium' and investors' lack of interest to offer that. But L&T has done it. We can expect more to follow", he said. Globally, ESG-labelled instruments from Indian companies have seen strong demand. In 2015, Exim Bank issued a $500-million green bond, followed by Axis Bank in 2016. But in India, listed green bond issuance, including municipal bonds, stood at just Rs.6,953 crore as of March 2025, according to Sebi data collated by Icra ESG Ratings Ltd. According to data cited by Nikhil Aggarwal, chief executive of investment platform Grip Invest, green bonds outperformed conventional bonds by nearly 2% in 2024. "The positive response from institutional investors highlights strong demand, which will be critical for future issuances," said Aggarwal. R. Shankar Raman,president, whole-time director and chief financial officer at L&T, told Mint the company aims to encourage responsible finance as a strategic pillar. "We received interest from reputed investors and arrangers who were aligned with the ESG theme. The issuance also enabled us to secure beneficial pricing, reflecting the positive market sentiment toward credible sustainability-linked offerings," he said. Data from Prime Database showed that India's green bond market saw 27 issues totalling Rs.8,743 crore between FY21 and FY25. The highest was in FY22, when Rs.2,677 crore was raised across 10 issues. Only two issues, worth Rs.700 crore, have been recorded so far in FY26. Sebi's 5 June circular introduced a framework covering green, social, sustainability, and sustainability-linked bonds. It mandated KPI-linked disclosures and third-party verification. "While the framework is robust, its effectiveness will depend on the independence and reputation of the third party hired," said Varghese....