Industry players have welcomed the government’s decision to focus on green bonds as part of its overall borrowing programme and using the proceeds in public sector projects.
“As a part of the government’s overall market borrowings in 2022-23, sovereign Green Bonds will be issued for mobilising resources for green infrastructure. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy,” said finance minister Nirmala Sitharaman while presenting the Union Budget 2022-23.
This assumes significance as India, at the 26th Conference of Parties (COP-26) in Glasgow last year, said that it will achieve net-zero emissions by 2070.
Simply put, green bonds are debt instruments that are used to raise money to fund projects that have a positive impact on the environment and climate among other things. They are at times referred to as climate bonds as well in a generic manner.
Green bonds have been fast gaining popularity with Climate Bonds Market Intelligence pegging the green bond market size at an all-time high of $517.4 billion in 2021. It further said that it was a 50 per cent jump when compared to the market size in 2020.
The growing popularity can be further corroborated by the fact that the green bond market size was $104 billion in 2015, as per Climate Bonds Market Intelligence.
Interestingly, India was at a distant 17th position among green bond issuing nations in 2021 with USA, Germany, China, France and UK occupying the top five slots. In 2021, India issued green bonds worth $16.5 billion, as per the study.
Industry participants, meanwhile, have welcomed the government announcement, which, they believe, will help India transition towards a carbon neutral economy.
Prashant Ruia of Essar Group tweeted: “A blue print budget with a nice touch of green! A bold one with a massive hike in public investment will be the booster dose to restart corporate investments. The infrastructure allocation with a focus on technology will generate employment & help transform tomorrow! #Budget2022”
He followed it up with another tweet: “Kudos to FM @nsitharaman ji for outlining plans to Transition to Carbon Neutral Economy & linking it to provide extra income to farmers & job opportunities to locals. At @Essar, we are committed to being net carbon neutral in next 3-5 yrs. #Budget2022”
Incidentally, in a recent interaction with Business Today, Vedanta Group CEO Sunil Duggal had listed green bonds as one of the immediate steps required for achieving net-zero status. He had said that India needed to create a policy and institutional structure to facilitate the rise of green finance as there are promising signs in the green bond market.
“Significant focus on sustainability and green energy. Individuals can look forward to additional avenues of investment with Sovereign Green Bonds to mobilise funds for green infrastructure,” said Tapati Ghose, Partner, Deloitte India. In a similar context, Ashish Gumashta, CEO, Julius Baer India said that the focus on clean energy is very much visible in the budget and issuance of green bonds, among other things, is a great move to attract global investors.
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