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India’s Sovereign Green Bonds Framework

India’s Sovereign Green Bonds Framework:

The Union Minister for Finance & Corporate Affairs has approved the final Sovereign Green Bonds Framework of India.

  • Sovereign Green Bonds will be issued for mobilising resources for green projects.
  • The Framework comes close on the footsteps of India’s commitments under “Panchamrit” as elucidated by the Prime Minister at Conference of Parties (COP) 26 at Glasgow in November 2021.
  • It will further strengthen India’s commitment towards its Nationally Determined Contribution (NDCs) targets, adopted under the Paris Agreement.
  • Green Finance Working Committee (GFWC) was constituted to validate key decisions on issuance of Sovereign Green Bonds.
  • The framework has been rated ‘Medium Green’, with a “Good” governance score by a Norway-based independent second opinion provider CICERO.
  • The ‘Medium Green’ rating is assigned ‘to projects and solutions that represent significant steps towards the long-term vision, but are not quite there yet.
  • All fossil fuel-related projects have been kept out of the framework, along with biomass-based renewable energy projects that rely on feedstock from ‘protected areas’.

Sovereign Green Bonds:

  • Green bonds are issued by companies, countries and multilateral organisations to exclusively fund projects that have positive environmental or climate benefits and provide investors with fixed income payments.
  • The projects can include renewable energy, clean transportation and green buildings, among others.
  • Proceeds from these bonds are earmarked for green projects. This is unlike standard bonds, the proceeds of which can be utilized for various purposes at the discretion of the issuer.
  • By the end of 2020, 24 national governments had issued Sovereign Green, Social and Sustainability bonds totalling a cumulative USD 111 billion dollars, according to the London-based Climate Bonds Initiative.