Framework for Sovereign Green Bonds

In News

• Recently, the Ministry of Finance has finalized the framework to issue Sovereign Green Bonds in line with global standards.
  • The issuance would be in line with the Budget announcement.

About green bonds

• Meaning:
  • Green bonds are financial instruments that generate proceeds for investment in environmentally sustainable and climate-suitable projects. 
  • The phrase green bond is sometimes used interchangeably with “climate bonds” or “sustainable bonds.”
• Projects :
  • The proceeds will be deployed in public sector projects, which help in reducing the carbon intensity of the economy. 
  • It would be used to fund renewable energy, energy efficiency, clean transportation, water and waste management, pollution prevention and control and green buildings among others.
  • Equity is allowed only in the sole case of metro projects under the Clean Transportation category.
• Exceptions
  • Nuclear power generation, landfill projects, alcohol/weapons/tobacco/gaming/palm oil industries and hydropower plants larger than 25 MW have been excluded from the framework. 
• Targets
  • The government intends to mobilise Rs 16,000 crore from the issuance of green bonds.
• Features
  • These are rupee-denominated papers and will have a long tenure to suit the requirement of green infrastructure projects.
• Green Finance Working Committee (GFWC) 
  • The Ministry has constituted a Green Finance Working Committee (GFWC) with representation from relevant Ministries and chaired by Chief Economic Adviser.
  • The committee will meet at least twice a year to support the Ministry of Finance with selection and evaluation of projects. 

Significance of the move

• This approval will further strengthen India’s commitment towards its Nationally Determined Contribution targets, adopted under the Paris Agreement.
• It will help in attracting global and domestic investments in eligible green projects. 

Source: IE