What is Green Bond Market and how it is important for India?
Green Bond Market is contemporary trending instrument for helping financial resources for funding greener projects. It is basically issued to mobilize funds for Green energy projects. Before moving on to the discussion, firstly know that ‘What are Bond and Bond Market’? A bond is refers to the fixed income investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. The bond market is a financial market in which the participants are provided with the issuance and trading of debt securities. Here, we are giving the meaning, concept of Green Bond Market, how it is important for India and how is different from general bond.
What is Green Bond?
The Green Bond Market is basically an instrument for mobilising funds for green projects like Wind Power, Solar Power, Biomass Power, Small Hydro Power, Waste-to-Power etc. It is different from general bond because fund raised from this bond are used for green projects only and this type bond offering are 'ear-marked' for use towards financing ‘green’ projects.”
How Green bonds are important for India?
1. The green bond market can play an important role in meeting the financial needs to achieve the ambitious goal of the prescribed national contribution under COP-21.
2. Presently, the need for funding to take India's renewable energy capacity from 30 Gigawatt to 175 Gigawatt in 2022 can be fulfilled through this.
3. The funds allocated through the market for the promotion of renewable energy have been unfinished. More investment can be made in the field of renewable energy by the financial institutions. Therefore, the role of Green Bond market in India is very important for promoting renewable energy sector. India entered green bond market in 2015 with the issuance of green bonds worth $ 110 million by major banks like Yes Bank, Indian Import-Export Bank, CLP Pawan Mill Machinery and IDBI.
4. In March 2015, the EXIM Bank issued $500 million worth of green bonds in overseas at a coupon rate of 2.75%, which is the first green bond of India. It was subscribed by 3.2 times showing tremendous interest among investors. Proceeds from green bonds are given by EXIM Bank to companies to finance renewable energy projects.