Do you know what sovereign green bonds are? Why is there little demand in India for these bonds?

Governments can raise money for infrastructure and clean energy projects through green bonds, but India has been unable to get the lower borrowing costs usually associated with them.

Deeksha Upadhyay 19 February 2025 10:04

What are Green bonds?

• The first green bonds were issued in 2007.
• Except for the fact that the issuer has promised to use the proceeds to finance projects that benefit the environment and the climate, green bonds are similar to other debt instruments.
• Who issue green bonds? Issuers can be countries, companies, and multilateral organizations. They can issue green bonds to finance projects that only benefit the environment and climate and pay investors a fixed income.
• Green initiatives include clean transportation, green buildings and renewable energy.
• What are the differences between conventional bonds and green bonds? Unlike conventional bonds whose proceeds can be used for any number of purposes at the issuer's discretion, green bond proceeds must be used for environmentally friendly or green projects. Green bond issuers must also disclose information about the project they intend to fund, including its expected impacts on the environment and climate.

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What are the benefits of sovereign green bonds for the Indian economy?

• Proceeds from sovereign green bonds will fund green public sector projects that will reduce the economy's carbon intensity.
• The government has also committed to achieving net zero carbon emissions by 2070 and 175 gigawatts of renewable energy capacity by 2022, which these green bonds will also contribute to.