Have You Heard Of Green Bond?

    • Agencies
    • Publish Date: Jan 25 2017 3:40PM
    • |
    • Updated Date: Jan 27 2017 6:38PM
Have You Heard Of Green Bond?
French Minister for Ecology, Sustainable Development and Energy Segolene Royal (L) and Finance Minister Michel Sapin attend a news conference to introduce France''s first state green bond in Paris. (Christian Hartmann/Reuters)

Paris: France has issued its first "green bonds" with a record seven billion euro ($7.5 billion) sale, paving the way for the establishment of a genuine market in renewable energy bonds. Proceeds from the sale of the 22-year bonds will be used to finance projects to address climate change. The initiative was first announced in April 2016 by President Francois Hollande who has championed his country's role as a leader in energy transition.

What are green bonds?

A green bond is like any other regular bond but with one key difference: the money raised by the issuer are earmarked towards financing `green' projects, i.e. assets or business activities that are environment-friendly. Such projects could be in the areas of renewable energy , clean transportation and sustainable water management. 


What are its benefits?

Green bonds enhances an issuer's reputation, as it helps in showcasing their commitment to wards sustainable development. It also provides issuers access to specific set of global investors who invest only in green ventures. With an increasing focus of foreign investors towards green investments, it could also help in reducing the cost of capital. 


When did the concept start?

In 2007, green bonds were launched by few development banks such as the European Investment Bank and the World Bank. Subsequently, in 2013, corporates too started participating, which led to its overall growth. Back home, Yes Bank was the first bank to come out with a issue worth Rs 1,000 crore in 2015. Following this, few other banks too had green bond issuances. CLP India, was the first Indian company to tap this route. So far, Rs 7,200 crore has been raised via green bonds.


Has Sebi mandated additional rules on such issues?

For designating an issue of a corporate bond as green bond, an issue apart from complying with the issue and listing of debt securities regulations, would have to disclose additional information in the offer document such as use of proceeds. 


 

What are the avenues where these funds can be invested?

Sebi's indicative list includes renewable and sustainable energy such as wind and solar, clean transportation, sustainable water management, climate change adaptation, energy efficiency , sustainable waste management and land use and biodiversity conservation. 

 

 
 
Poland was the first country to enter the green bond market with a more modest 750 million euro issue in December. Previously they had only been issued by companies or finance institutions such as the World Bank.

 
 

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