GREEN BONDS

GREEN BONDS

Subject: Economics

Context: RBI Governor says that the cost of green bond issuance is high in India.

Concept:

• A green bond is like any other regular bond but with one key difference: the money raised by the issuer are earmarked towards financing `green’ projects, i.e. assets or business activities that are environment-friendly.
• The issuance of the first green bond in 2007 was made by two multilateral development banks (World Bank and European Investment Bank).
• India’s first green bond was issued by YES Bank in 2015.

Benefits of Green Bonds

• Green bonds enhance an issuer’s reputation, as it helps in showcasing their commitment to wards sustainable development.
• It also provides issuers access to specific set of global investors who invest only in green ventures.With an increasing focus of foreign investors towards green investments, it could also help in reducing the cost of capital.
• Green bonds present the opportunity for investors to feel as if they’re making a difference for the environment while earning a respectable return in the process.

SEBI Regulations

• For designating an issue of a corporate bond as green bond, an issue apart from complying with the issue and listing of debt securities regulations, would have to disclose additional information in the offer document such as use of proceeds.
• SEBI’s indicative list includes renewable and sustainable energy such as wind and solar, clean transportation, sustainable water management, climate change adaptation, energy efficiency, sustainable waste management and land use and biodiversity conservation.