SEBI finalises norms for listing of green bonds

• Regulator SEBI(Security Exchange Board of India) has finalized norms for issuance and listing of green bonds, which will help in raising funds from capital markets for investment in the renewable energy space.

What are Green bonds?

• A green bond is like any other regular bond but with one key difference: the money raised by the issuer are earmarked towards financing `green' projects, i.e. assets or business activities that are environment-friendly. Such projects could be in the areas of renewable energy , clean transportation and sustainable water management.

Analysis:

• Green bonds enhance an issuer's reputation, as it helps in showcasing their commitment to wards sustainable development. It also provides issuers access to specific set of global investors who invest only in green ventures. With an increasing focus of foreign investors towards green investments, it could also help in reducing the cost of capital.
• In 2007, green bonds were launched by few development banks such as the European Investment Bank and the World Bank. Subsequently, in 2013, corporates too started participating, which led to its overall growth. In India, Yes Bank was the first bank to come out with a issue worth Rs 1,000 crore in 2015. Following this, few other banks too had green bond issuances. CLP India, was the first Indian company to tap this route.
• India has embarked on an ambitious target of building 175 gigawatt of renewable energy capacity by 2022. This requires a massive $200 billion in funding. However, higher interest rates and unattractive terms under which debt is available in India raise the cost of renewable energy by 24-32% compared to the U.S. and Europe. Budget allocations have also been insufficient and the market is also very limited. Therefore, green bonds help raise funds for the projects in this sector.

By: Vishal