RBI to Auction Green Bonds in 2 Tranches of ₹8,000 Crore each in Jan, Feb

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.

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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.