Joining the green bond wave: India's path to sustainable development

India has joined other countries in issuing green bonds to achieve sustainable development by raising capital for environmental projects, inspiring global action for a greener future.

sovereign green bond
  • Green bonds are the newest option for funding eco-friendly projects.

  • The green bond framework in India will govern all aspects related to the bond.

  • The RBI has issued green bonds in India at attractive interest rates and tenure.

In early 2023, India joined 19 other countries to issue green bonds. These innovative financial instruments play a pivotal role in helping nations achieve their sustainable development goals.

By launching its own green bonds, India aims to raise crucial capital that will be directed towards addressing environmental challenges and fulfilling its pressing environmental priorities.

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What are green bonds?

A green bond is a sovereign bond through which the government can raise capital and finance its environmental projects. Like other bonds, green bonds will be financial instruments bearing a fixed interest income.

Corporations and other organisations can also issue these bonds for similar usage objectives. These projects contribute to the generation of renewable energy, cleaner transportation, green buildings and so on.

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Green bonds framework

The Department of Economic Affairs has put a framework for sovereign green bonds in place. This framework will be applicable to all sovereign green bonds to be issued by the Government of India. 

  • Use of proceeds - The proceeds of issued green bonds will be used for green projects. This includes projects that encourage energy efficiency in resource utilisation and reduce the emission of carbon and greenhouse gases. Green bond benefits also include an increase in climate adaptation, biodiversity and natural ecosystems. 
  • Eligible project categories - The project categories defined by the framework, along with typical projects, are:
  1. Renewable energy projects engaged in investments in biomass, solar, wind energy, and hydro-power projects

  2. Energy efficiency projects, including energy efficient installations in government buildings, public lighting, reduce grid losses, etc.

  3. Clean transportation projects like the promotion of public transportation and the use of clean fuel-driven vehicles

  4. Climate change adaptation projects like climate observation systems and early warning systems 

  5. Sustainable water and waste management projects like efficient irrigation, flood defence, water conservation, etc.

  6. Pollution prevention and control projects like emission control and waste-to-energy projects

  7. Green building projects

  8. Sustainable management of living natural resources and land use

  9. Terrestrial and aquatic biodiversity conservation

The framework also defines the projects specifically excluded from the scope of green bonds, expenditures to be included in projects, project evaluation and selection mechanism and various other aspects related to the efficient management of these green bond-aided projects.

Indian Green Bonds

If you follow personal finance news, you would know that RBI issued its first sovereign green bonds at an estimated initial value of Rs 8,000 crores. The sovereign green bonds 2028 and sovereign green bonds 2033 have an interest rate of 7.1% and 7.29% respectively. 

Investments in green bonds can be made through the RBI retail direct website or through your account with one of the brokerage firms. Investors can invest in these bonds after taking their investment goals and their existing portfolio into consideration.  

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