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Sovereign green bonds get FM Sitharaman nod to raise money for environmental projects

Sovereign Green Bonds Framework: Finance Minister Nirmala Sitharaman has authorised the India’s first Sovereign Green Bonds Framework. With this endorsement, India’s commitment to the Paris Agreement’s objectives will grow, encouraging domestic and foreign investment in environmentally friendly initiatives. The proceeds from the sale of sovereign green bonds will be used to fund government initiatives to reduce the carbon intensity of the economy.

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Green bonds

Green bonds, according to estimates, could help the government raise Rs 16,000 crore. Green bonds may also be issued in the second half of this fiscal year. These bonds will be issued for a long period of time in order to fund green infrastructure projects.

According to the Finance Ministry, this framework is in line with India’s obligations under Prime Minister Narendra Modi’s ‘Panchamrut’ vision for the COP26 conference in Glasgow in 2021. When presenting the budget for 2022-2023, Finance Minister Nirmala Sitharaman mentioned raising funds for green projects by issuing sovereign green bonds.

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Sovereign Green Bonds v/s traditional bonds

Sovereign Green Bonds are a type of financial instrument used to raise funds for climate change and environmental projects. Sovereign green bonds have a lower cost of capital when compared to traditional bonds.

In light of this, India’s first sovereign green bond framework was established, and the Green Finance Working Committee (GFWC) was formed to approve significant decisions on the issuance of sovereign green bonds. Cicero from Norway will investigate India’s green bond structure. Cicero assigned a favourable rating to India’s Green Bond Framework, classifying it as ‘Medium Green.’

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