Green bond is a debt instrument issued to raise money only for climate change and environment related projects. Climate bonds (also known as green bonds) are fixed-income financial instruments (bonds) which are used to fund projects that have positive environmental and/or climate benefits. It is a tax incentive scheme to attract more investors. They follow the Green Bond Principles stated by the International Capital Market Association (ICMA). In 2009, the world bank issued green bonds for the first time. It has been active in the United States and its issuances have totaled USD 5.3 billion between FY 2014 and FY 2018. The scenario of green bond market are-
1. In 2018, State Bank of India (SBI) entered the Green Bond market with $650 million certified climate bond.
2. In the first half of 2019, India became the second-largest Green Bond market globally after China with $10.3 billion worth of transactions, as per the Economic Survey 2019-20.
3. In October 2019, India joined the International Platform on Sustainable Finance (IPSF) to scale up the environment-friendly investments.
4. However, SEBI provides a list for green bonds that should include projects of renewable and sustainable energy such as wind and solar, clean transportation, sustainable water management, climate change adaptation, energy efficiency , sustainable waste management and land use and biodiversity conservation.
Benefits of Green bonds
Some if the benefits of Green bonds are-
- Firstly, such bonds are commitment to sustainable development of the country and also the world.
- Secondly, it possesses a lower interest rate as compared to loans of commercial banks.
- Thirdly, foreign investors are focussing on green investment as it lowers the cost of capital of the project.
- Than, it helps to achieve Sustainable Development Goals 2030.
- Lastly, it increases reputation of investors in the market as it shows their commitment towards the environment.