Finance Minister Nirmala Sitharaman in her Budget speech announced that the government proposes to issue sovereign green bonds to mobilise resources for green infrastructure.
- The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.
- Now, the government has clarified that these rupee-denominated papers will have a long tenure to suit the requirement of green infrastructure projects.
- A green bond is a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects.
- These bonds are typically asset-linked and backed by the issuing entity’s balance sheet, so they usually carry the same credit rating as their issuers’ other debt obligations.
- Green bonds may come with tax incentives to enhance their attractiveness to investors.
- The World Bank is a major issuer of green bonds.
- It has issued 164 such bonds since 2008, worth a combined $14.4 billion. In 2020, the total issuance of green bonds was worth almost $270 billion, according to the Climate Bond Initiative.
- Green bonds work just like any other corporate or government bond.
- Borrowers issue these securities in order to secure financing for projects that will have a positive environmental impact, such as ecosystem restoration or reducing pollution.
- Investors who purchase these bonds can expect to make as the bond matures.
- In addition, there are often tax benefits for investing in green bonds.