Sovereign Green Bonds

Sovereign Green Bonds UPSC: Relevance

• GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Sovereign Green Bonds: Context

• Recently, it was informed that India will issue at least 240 billion rupees ($3.3 billion) in sovereign green bonds as the country marks a shift towards a low-carbon economy.

Sovereign Green Bonds: Key points

• The debut sale of sovereign green bonds may take place in the first half of FY23 that starts on April 1, and a decision to sell more green debt will depend on the response to the initial issuance.
• The initiative comes in the backdrop of its plans to fund renewable energy projects that will help meet its goal of net-zero emissions by 2070.
• The issuance comes due to global boom in sustainable investments.
• India is the world’s third-biggest emitter of greenhouse gases and plans to more than quadruple its renewable power generation capacity by 2030.

What are green bonds?

• Green bonds are the bonds issued by companies, countries and multilateral organisations to exclusively fund projects that have positive environmental or climate benefits.
• The projects can include renewable energy, clean transportation and green buildings, among others.
  • In standard bonds, however, the proceeds of which can be utilised for various purposes at the discretion of the issuer.
• The issuer of green bonds issuers is also required to provide details regarding the project they intend to finance as well as its expected climate and environmental impacts.

Green bond market

• The green bond market witnessed a cumulative issuance worth more than $1 trillion since market inception in 2007.
• By the end of 2020, 24 national governments had issued Sovereign Green, Social and Sustainability bonds.

Green bond India

• In the Union Budget, our Finance Minister had said that Sovereign Green Bonds will be issued for mobilising resources for green infrastructure, as a part of the government’s overall market borrowings in 2022-23.
• She said that the proceeds from these bonds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.

Green Bonds vs Climate Bonds

• The term ‘labelled’ green bonds refers to bonds marketed by the issuer as ‘green’, where the proceeds are for climate / green assets or projects.
• ‘Climate-themed bonds’ are represented by a broader category of bonds whose proceeds are for climate projects but that are not (yet) labelled as green. It is much wider than the ‘labelled green bonds market’.

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