GREEN BONDS

1. Context

2. About Green Bonds

• Green bonds are bonds issued by any sovereign entity, inter-governmental groups or alliances and corporates with the aim that the proceeds of the bonds are utilised for projects classified as environmentally sustainable.
• The framework for the sovereign green bond was issued by the Government on November 9, 2022.
• The RBI is auctioning two green bonds with tenures of 5 and 10 years, worth Rs 4, 000 crores each.
• The two bonds to be auctioned today are New GOI SGrB 2028 and New GOI SGrB 2033.

3. Importance 

• Over the last few years, Green Bonds have emerged as an important financial instrument to deal with the threats of climate change and related challenges.
• According to the International Finance Corporation (IFC), a World Bank Group institution, climate change threatens communities and economies and it poses risks to agriculture, food and water supplies.
• A lot of financing is needed to address these challenges.
• It's critical to connect environmental projects with capital markets and investors and channel capital towards sustainable development and Green Bonds are a way to make that connection.

4. The benefits for investors

• Green Bonds offer investors a platform to engage in good practices, influencing the business strategy of bond issuers.
• They provide a means to hedge against climate change risks while achieving at least similar, if not better, returns on their investment.
• In this way, the growth in Green Bonds and Green finance also indirectly work to disincentivise high carbon-emitting projects as per the IFC.

5. The Govt plan these bonds

• In August last year, the Government said it stands committed to reducing Emissions. 
• The intensity of GDP by 45 per cent from the 2005 level by 2030, achieving about 50 per cent cumulative electric power installed capacity from non-fossil fuel-based energy resources by the same year.
• In line with the commitment to significantly reduced the carbon intensity of the economy, the Union Budget 2022-23 announced to issue of Sovereign Green Bonds.
• The country's climate actions have so far been largely financed by domestic resources and it is now targeting the generation of additional global financial resources.
• The issuance of the Sovereign Green Bonds will help the Indian government in tapping the requisite finance from potential investors for deployment in public sector projects aimed at reducing the carbon intensity of the economy.

5. The proceedings

For Prelims & Mains