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Looking towards a greener future – OPINION – The Hindu

  • Looking towards a greener future

  • India’s green bond market has witnessed many milestones, but its full potential remains untapped
  • Green bonds, which finance environmentally friendly businesses and assets, have emerged as one of the key financing mechanisms driving the global economy’s transition to a greener future.
  • Issuance of the first green bond in 2007 by two multilateral development banks (World Bank and European Investment Bank), the green bond market has grown exponentially and is currently pegged at over $180 billion in cumulative issuance.
  • A groundbreaking year for green bonds was 2015. Global markets witnessed currency green bonds and innovative structuring along with maiden green bond issuance in a number of countries
  • Contributing to sustainable growth

  • India’s green bond market has witnessed a number of critical milestones following Yes Bank’s and India’s first green infrastructure bonds issued in February 2015.
  • India also witnessed its award-winning first green masala bond (rupee-denominated bond), with the International Financial Corporation raising an off-shore rupee bond on London Stock Exchange for investing in Yes Bank’s green bond, demonstrating how innovations in emerging markets have the potential to capture global attention.
  • Green bond issuance in the country witnessed a 30 per cent year-on-year increase in 2016, cumulatively amounting to about Rs.18,131 crore (equivalent to $2.7 billion) and making India the seventh largest green bond market globally.
  • Green bonds have been crucial in increasing financing to sunrise sectors like renewable energy, thus contributing to India’s sustainable growth.
  • The Climate Bond Initiative, in its India update, indicated that about 62 per cent of the green bond proceeds have been allocated to renewable energy projects, followed by the low carbon transport sector and low carbon buildings accounting for 17.5 per cent and 14 per cent of the proceeds, respectively.
  • In January 2016, the Securities and Exchange Board (SEBI) of India published its official green bond guidelines and requirements for Indian issuers, placing India amongst a select set of pioneering countries who have developed national level guidelines.
  • the Reserve Bank of India passed regulatory reforms aimed at strengthening and expanding India’s corporate bond market.
  • Expectations from 2017 and beyond

  • Further to the interpretation indicated in SEBI’s green bond guidelines on what classifies as ‘green’, there is a need for developing a formal definition of ‘green’ to ensure understanding across sectors.
  • The upcoming year is poised to witness the first ‘blue bond’ issuance (bonds used to specifically finance water infrastructure) in India.