The test for India's sovereign green bonds
Corporates have been issuing green bonds in India for a few years in a growing market, but the country's global share stood at just 1% in the first half of 2022. Green bonds are an instrument to raise money-at lower cost than regular bonds-for environment-friendly projects.
Big corporations such as Adani Green Energy and Tata Power are also reportedly looking to tap into green bonds and sustainability-linked loans As India aims to curtail carbon emissions by 1 billion tonnes by 2030, the shift will get stronger, but not without challenges. Lost Momentum? Green bond issuances in India grew sevenfold year-on-year in 2021 because issuances had dropped in 2020 due to the pandemic, shows data from Climate Bonds Initiative.
Offshore dominance While domestic certified issuances are likely to gain traction in coming years, Indian companies have already been tapping into the international green bond market through segments beyond green bonds, among which sustainability-linked bonds are also gaining popularity for industrial decarbonization.
According to a June 2022 CEEW-CEF report, about 67% of India's $8-billion offshore sustainability-themed bond issuances was in green bonds, while nearly 20% was in SLBs. Sovereign green bonds can play a catalyzing role in raising the profile of green bonds in India, through a mix of overseas and domestic investors. Much-needed push India's sovereign green bonds could bring in much-needed capital for its green transition, with the proceeds going to projects that could help reduce the carbon intensity of the economy