Various Green Bonds Initiatives of India in recent times
In recent times India has been emerging as a major player in the green bonds market. Among the developing countries, India is only the second country after China coming among the top 10 labeled green bonds players in terms of issuance. It is the 7th largest issuer of bonds globally at a value of $2.7 billion until October 2016.
What are Green Bonds?
With the aim of promoting green economy across the world, green bonds have been initiated to finance the environment friendly businesses and assets. The first two banks to issue these were the World Bank and the European Investment Bank. They have attracted corporates and financial institutions across the world and became popular very qucikly.
Initiatives with regard to Green Bonds
The potential for green bonds market in India was first recognized by the private sector banks in 2015. Some of these organizations include Axis Bank, ReNew Power Ventures and Hero Future Energies. Later it was taken up by the government organizations like NTPC, Neyveli Lignite, Rural Electrification Corporation etc. The government has issued them in the form of masala bonds (or rupee denominated bonds).
Some of the positive approaches with regard to these Green Bonds include:
- Apart from China India is the only country that has issued national-level guidelines for issuing and listing green bonds in the stock exchanges. The SEBI has chosen to keep the definition of green bonds flexible by asserting that it will set definitions vide notifications from time to time. Some of the optional requirements are review or certification by independent party either pre-issue or post-issue. It is however mandatory for the issuer to disclose the projects in which the proceeds from issuance of green bonds has been used or to be used. It can be in the form of annual reports or periodical filings made to stock exchanges.
- Five of the seven bonds that are issued by India are reviews and certified by external auditors. The bonds of NTPC were certified against Climate Bonds Standard.
- The India’s green masala bond has been listed in the London Stock Exchange.
- The RBI has passed regulatory reforms. The extent of partial credit enhancement provided by the banks has been increased from 20 per cent to 50 per cent.
Path Ahead
Although so much has been done, the green bonds market of India still remains largely untapped. There is more scope for innovation in terms of supporting policy and regulatory frameworks. Green financing is bound to rise with the COP22 of the Paris Accord being concluded in 2017. To conclude, expanding their scope can help in addressing problems of climate change.
GS Mains Question
In recent times India has been emerging as a major player in the green bonds market. What are Green Bonds? How do they help in protection of environment? Discuss some of the major Green Bond initiatives in India.
