Govt approves India’s first sovereign green bonds framework
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Giving a strong signal of the country's commitment to a low-carbon economy, Union Minister for Finance & Corporate Affairs Nirmala Sitharaman has approved the final Sovereign Green Bonds framework of India. This approval will further strengthen India’s commitment towards its Nationally Determined Contribution (NDCs) targets, adopted under the Paris Agreement, and help in attracting global and domestic investments in eligible green projects. The proceeds generated from issuance of such bonds will be deployed in Public Sector projects which help in reducing carbon intensity of the economy.
The Framework comes close on the footsteps of India’s commitments under ‘Panchamrit’ as elucidated by the Prime Minister, Narendra Modi, at COP26 at Glasgow in November, 2021. The approval is fulfillment of the announcement in the Union Budget FY 2022-23 by the Union Finance Minister that Sovereign Green Bonds will be issued for mobilising resources for green projects.
Green bonds are financial instruments that generate proceeds for investment in environmentally sustainable and climate-suitable projects. By virtue of their indication towards environmental sustainability, green bonds command a relatively lower cost of capital vis-a-vis regular bonds and necessitates credibility and commitments associated with the process of raising bonds.
In the above context, India’s first Sovereign Green Bonds framework was formulated and as per the provisions of the framework, Green Finance Working Committee (GFWC) was constituted to validate key decisions on issuance of Sovereign Green Bonds.
