Go for green bonds

Go for green bonds

News:

  1. India must raise climate finance through Green Bonds.

Important News:

  1. Global population and Economic growth has caused global warming, increase in Carbon Dioxide emissions.
  2. India must raise climate finance through Green Bonds to tackle issues arising of climate change.
  3. What are Green Bonds:
  • Green Bond is a debt instrument with which an entity raises money from investors and utilizes it to fund Green Projects (renewable energy, emission reductions and so on)
  • It is recognized by United Nation Framework Convention on Climate Change (UNFCCC).
  • Green bonds are issued by multilateral agencies such as the World Bank, corporations, government agencies and municipalities
  1. Important Facts:
  • It was first issued by World Bank and European Investment bank in 2007
  • The first Green Bond issue in India, was by Yes Bank in 2015 followed by the CLP Wind Farms India for Rs.600 crores for its wind portfolio.
  1. Why Green Bonds are important for India:
  • To fulfill India’s goal in terms of renewable energy installations (target of building 175 gigawatt of renewable energy capacity by 2022).
  • Budget allocations have been insufficient for renewable energy sector.
  1. Why Green Bonds an attractive option for India:
  • Provide low cost, long term capital/loan for renewable energy projects.
  • Provide access to wide range of domestic and international investors.
  • Offer safeguard against carbon transition risks in portfolios that include emissions intensive areas (Transition of companies from Carbon intensive to Renewable source of energy)
  1. Major obstacles for India to raise Green Bonds:
  • Inefficient Regulatory Monitoring Mechanism
  • High Currency Hedging cost (way for a company to minimize or eliminate foreign exchange risk).
  • Poor Sovereign Rating
  • Lack of standardized reporting
  • Exposure to credit risk
  1. India should strive for raising climate finance through innovation as it is capable of making differences in Green Economy.
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