Sovereign Green Bonds (SGrBs) are issued by governments, intergovernmental groups or corporations, and aim to raise funds for environmentally sustainable projects. They are considered a valuable financial instrument in addressing climate change and related challenges.
The government issued the framework for the sovereign green bond on November 9, 2022. In the current financial year Reserve Bank will auction Sovereign Green Bond auction worth Rs 16,000 crore. The government is committed to reducing emissions intensity of GDP by 45% from the 2005 level by 2030 and achieving about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by the same year. In line with this commitment, the Union Budget 2022-23 announced the issuance of Sovereign Green Bonds.
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Green Bonds offer investors an opportunity to participate in good practices, influence the business strategies of bond issuers, hedge against climate change risks, and achieve similar or better returns on their investment.
The proceeds raised from the SGrBs will be used to finance or refinance expenditures for various green projects, including renewable energy, clean transportation, energy efficiency, climate change adaptation, sustainable water and waste management, pollution and prevention control, and green buildings. Investments in renewable energy will be made in solar, wind, biomass, and hydropower energy projects.
By generating additional global financial resources, the issuance of SGrBs will enable the Indian government to tap potential investors for deployment in public sector projects aimed at reducing the carbon intensity of the economy.
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FAQs:
Q1: What is a Sovereign Green Bond?
A Sovereign Green Bond (SGrB) is a financial instrument issued by governments, intergovernmental groups or corporations that aims to raise funds for environmentally sustainable projects.
Q2: What are the benefits of investing in Sovereign Green Bonds?
Investing in Sovereign Green Bonds offers several benefits, including participating in good practices, influencing the business strategies of bond issuers, hedging against climate change risks, and achieving similar or better returns on investment.