The Reserve Bank of India (RBI) will auction ₹16,000 crore of sovereign green bonds (SGrBs) in two tranches. The RBI will auction 5-year and 10-year green bonds worth ₹4,000 crore each on 25 January and on 9 February, and this would be a uniform price auction.
Focus Is On Public Sector Projects:
The proceeds will be deployed in public sector projects, which help in reducing the carbon intensity of the economy. As announced in the Union Budget 2022-23, the central government as part of its overall market borrowings will be issuing Sovereign Green Bonds for mobilising resources for green infrastructure.
What are Green Bonds:
- Green bonds are issued by companies, countries and multilateral organisations to exclusively fund projects that have positive environmental or climate benefits and provide investors with fixed income payments.
- The projects can include renewable energy, clean transportation and green buildings, among others.
- Proceeds from these bonds are earmarked for green projects. This is unlike standard bonds, the proceeds of which can be utilised for various purposes at the discretion of the issuer.
- The international green bond market has seen cumulative issuance worth more than USD 1 trillion since market inception in 2007.
- By the end of 2020, 24 national governments had issued Sovereign Green, Social and Sustainability bonds totalling a cumulative USD 111 billion dollars, according to the London-based Climate Bonds Initiative.
What is the Significance of Sovereign Guarantee to Green Bonds:
- Sovereign green issuance sends a powerful signal of intent around climate action and sustainable development to governments and regulators.
- It will catalyze domestic market development and provides impetus to institutional investors.
- It will provide benchmark pricing, liquidity and a demonstration effect for local issuers, helping to support the growth of a local market.
Objective of The Green Bonds:
The Finance Minister in the Budget 2022 announced that the government proposes to issue sovereign green bonds to mobilise resources for green infrastructure.
- The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.
- The announcement is in sync with India’s commitment to achieving net-zero carbon emissions by 2070.