Sovereign Green Bonds

Sovereign Green Bonds

The Reserve Bank of India (RBI) will issue Sovereign Green Bonds for the first time in the current fiscal year in two tranches of Rs 8,000 crore each.
On January 25 and February 9, the RBI would issue green bonds for five and ten years worth Rs 4,000 crore each.
In November 2022, the government released the blueprint for the sovereign green bond.

About the green bond:

Companies, nations, and international organizations all offer green bonds, which guarantee fixed-income payments to investors while only funding initiatives that benefit the environment or the climate.
The initiatives could involve, among other things, green buildings, sustainable transportation, and renewable energy.
These bonds' earnings are designated for environmental projects. This is different from regular bonds, which allow the issuer to use the proceeds for a variety of things.
Since the market's launch in 2007, there have been cumulative issuances on the global green bond market totaling more than USD 1 trillion.
According to the London-based Climate Bonds Initiative, by the end of 2020, 24 national governments would have issued sovereign green, social, and sustainability bonds worth a total of USD 111 billion.

How would the Indian economy benefit from the Sovereign Green Bonds?

In order to reduce the economy's carbon intensity, environmentally friendly public sector projects will be funded with the proceeds from the sovereign green bonds.
These green bonds will also aid with the government's lofty goals, such as achieving 175 gigawatts of renewable energy capacity by 2022 and achieving net zero carbon emissions by 2070.
Governments and authorities are sent a strong signal of intent about climate change and sustainable development by sovereign green issuance.
It will spur the growth of the local market and provide institutional investors a boost.

Way Forward

Addressing the institutional hurdles to entry into this market will benefit from appropriate capacity development activities for issuers in emerging nations to disseminate information on the advantages and associated processes and procedures pertaining to green bonds.

Source: The Indian Express

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