Reserve Bank of India (RBI)? held its first auction of Sovereign Green Bonds (SGrBs), with a total value of Rs 8,000 crore on 25 January.
With a total auction value of Rs 16,000 crore for sovereign green bonds, this is the first of two auctions the RBI will hold during the current fiscal year.
A "green bond" is distinguished from a standard bond by its designation, which denotes a promise to use the funds raised only to finance or re-finance "green" projects, assets, or business activities.
A green bond is a fixed-income financial instrument used to raise money from investors through the debt capital market, just like any other bond.
The bond issuer typically collects a fixed sum of money from investors over a predetermined time period (maturity), repaying the money (principal) when the bond matures and paying a predetermined amount of interest (coupons) along the way.
India has pledged to achieve cumulative installed capacity of electric power from non-fossil fuel-based energy resources of about 50% by 2030 and to reduce the carbon intensity of its economy by 45% from 2005 level by that time.
The nation has so far financed most of its domestic resources used for climate action; however, in order to achieve its climate goals, it is now aiming to generate additional global financial resources.
The Union Budget 2022¨C23 announced the issuance of Sovereign Green Bonds in line with the goal of significantly reducing carbon emissions and fostering climate resilience.
As a part of the overall market borrowings, the government will be able to attract the necessary funding from potential investors with the help of the issuance of Sovereign Green Bonds.
These funds will then be used for public sector projects that encourage resource utilisation that is energy efficient, lower greenhouse gas emissions, improve natural ecosystems, and increase biodiversity, all of which will lower the economy's carbon intensity.
On November 9, 2022, the Department of Economic Affairs, Ministry of Finance released the Sovereign Green Bond Framework, which outlines the duties of the Indian government as a Green Bond issuer.
The framework, which is intended to adhere to the International Capital Market Association's (ICMA) Green Bond Principles, is applicable to all Sovereign Green Bonds issued by the union government.
The performance of the eligible projects is not a requirement for the payment of principal or interest on the issuances made under this framework. Investors in bonds issued under this framework are not subject to any risks associated with the projects.
Two green bonds with a face value of Rs 4,000 crore each and terms of five and ten years are being auctioned by the RBI. New GOI SGrB 2028 and New GOI SGrB 2033 are the names of the two bonds that were scheduled for auction on January 25, 2023.
The Core Banking Solution (E-Kuber) system of the RBI is being used to conduct the auction for these bonds, and the results will be made public today.
On February 9th, 2023, the central bank will hold an auction for the subsequent tranche of green bonds.
The central government will fund or refinance expenditures (in whole or in part) for green projects falling under "Eligible Categories" using the money raised from Sovereign Green Bonds (SGrBs). These include-
1. Renewable energy
2. Energy efficiency
3. Clean transportation
4. Climate change adaptation
5. Sustainable water and waste management
6. Pollution prevention and control
7. Green buildings
8. Sustainable management of living natural resources and land use
9. Terrestrial and Aquatic Biodiversity Conservation