Indian sovereign green bonds are issued for contribution towards sustainability of climate and to strengthen the Indian currency. They are issued in local currency in the national and global market. They attract primarily domestic investors because the get invested in the central bank of India. Just like regular bonds, companies and governments issue green bonds, but the borrowed money goes toward specific environmental projects.
In India, ongoing environmental projects, including the Green India Mission (GIM), which influences green bands (or green belts) to protect, restore, and enhance forest cover, contributing to climate change adaptation and mitigation, and promoting sustainable development. In environmental context, a “green belt” refers to a policy or practice of designating and protecting areas of undeveloped land, often surrounding or near urban areas, to prevent urban trail, preserve natural habitats, and enhance the environment.
Some well-known green bonds in India include those issued by NTPC (National Thermal Power Corporation) for renewable energy projects, IRFC (Indian Railway Finance Corporation) for sustainable transportation, and Yes Bank, one of the first private sector green bond issuers, Tata Cleantech Capital Limited, Ghaziabad Nagar Nigam, National Highways Authority of India (NHAI), and green bonds issued by municipal corporations like Vadodara and Indore which are also focused on renewable energy.
Green bonds that are issued to raise finance for climate change solutions were in the past also called climate bonds. They are used for climate change mitigation or adaptation related projects or programs’, what makes a bond “green”? The funds raised from its issuance are exclusively used to finance or refinance projects with a positive environmental impact, such as renewable energy, energy efficiency, and sustainable water management, rainwater harvesting, reforestation etc.
It’s all about the purpose. When you buy a green bond, your money is being used for things like renewable energy sources, clean transportation, or projects that reduce pollution. A green bond is used to finance or refinance projects that contribute positively to the environment and or climate. As of January 2023, green bonds have raised $2.5 trillion globally to support green and sustainable projects. As the market for these bonds has grown, investors have become more conscious of the overall impact of their investments.
Why do we need Green Bonds? These bonds could help meet India’s ambitious clean energy and infrastructure development goals. For instance, in Feb 2023 the government committed ₹35,000 crore, over multiple years, towards green tech to achieve its net zero emission target. This spend is only expected to rise.
India’s Sovereign Green Bond (SGrB): In a bid to mobilize resources for green infrastructure projects, India issued its first SGrB of ₹8,000 crore, a two-tranche deal divided equally between five and ten-year terms, in January 2023. On February 9, each portion of money was reopened for an additional ₹8,000 crore, bringing India’s total green bond liabilities to ₹16,000 crore in FY23. Sovereign Green Bonds are debt securities issued by a national government to fund projects that have positive environmental benefits. The proceeds from these bonds are exclusively allocated to green initiatives, which can include renewable energy projects, sustainable agriculture, waste management, and more.
In 2024, the green bond market saw strong performance, with issuance reaching record levels and outperforming conventional bond markets, reaching a cumulative value of $447 billion. Green bonds continue to be the preferred instrument for utilities, with 81% of their total issued in GSS bonds. Green, social, and sustainability (GSS) bonds finance projects with measurable environmental, social, or sustainability objectives. Green bonds fund eco-friendly projects such as renewable energy and climate adaptation. Social bonds address social challenges like affordable housing and healthcare.
Green bonds are a good source for safe investment. For corporates, it is one of the best tools to raise funds to support environment or climate-related projects. Organization-guaranteed Bonds – it is also known as general obligation bonds. The bonds creditworthiness is based on the organization issuing the bond.
Like green bonds blue Bonds and blue loans are financing instruments that raise and allocate funds for investments such as water and wastewater management, reducing ocean plastic pollution, marine ecosystem restoration, sustainable shipping, eco-friendly tourism, or offshore renewable energy. Blue bonds have not been issued in India yet. However, a report on blue bonds has been prepared by Niti Aayog and submitted to SEBI in 2023.
