Green bonds bring new funding for clean firms

Renewable and sustainable energy, clean transportation, sustainable water management, climate change adaptation and energy efficiency are some of the broad categories of areas for which Indian companies would be permitted to raise funds through the issue of green bonds.

What differentiates a green bond from other bonds is that the proceeds of a green bond offering are ‘ear-marked’ for use towards financing ‘green’ projects. According to estimates, India would require $2.5 trillion for meeting India’s climate change actions between now and 2030.

“Further, India has embarked upon an ambitious target of building 175 gigawatt of renewable energy capacity by 2022 and this requires a massive estimated funding of $200 billion. Thus, the financing needs of renewable energy space require new channels to be explored which can provide not only the requisite financing, but may also help in reducing the cost of the capital. Green bonds as a part of corporate bonds space may be one of the answer to this problem,” Sebi said in a note put out on its website.

For assigning the status of the bonds as ‘green’, the broad categories of areas where such money may be invested include renewable and sustainable energy (wind, solar), clean transportation (mass transportation), sustainable water management (clean/drinking water, water recycling), energy efficiency (efficient and green building), sustainable waste management (recycling waste to energy) and bio diversity conservation. However, the regulator said that this is just an indicative list and would include other areas after public consultation.

According to Sebi, there is specific global pool of capital, which are earmarked towards investment in green ventures. This source of capital focuses primarily on environment, social and governance related aspects of the projects in which they intend to invest.