Sovereign Green Bonds (SGrBs)
SGrBs are a kind of government debt that specifically funds projects attempting to accelerate India’s transition to a low carbon economy
Sovereign green issuance sends a powerful signal of intent around climate action and sustainable development to governments and regulators.
It will catalyze domestic market development and provides impetus to institutional investors.
It will provide benchmark pricing, liquidity and a demonstration effect for local issuers, helping to support the growth of a local market.
Reserve Bank of India (RBI) green lighted investments in the country’s Sovereign Green Bonds (SGrBs) by Foreign Institutional Investors (FIIS) — investors such as insurance companies, pension funds and nation-states’ sovereign wealth funds.
Allowing FIIs to invest in India’s green projects widens the pool of capital available to fund the country’s ambitious 2070 net zero goals, ensuring 50% of India’s energy comes from non-fossil fuel based sources and to reduce the carbon intensity of the nation’s economy by 45%
SGrBs yield lower interest than conventional Government-Securities (G-Secs), and the amount foregone by a bank by investing in them is called a greenium.
But central banks and governments the world over are encouraging financial institutions to embrace greeniums to hasten the transition to a greener future.
Climate finance experts believe India would gain from allowing FIIs in green G-Secs.
They say FIIs are also looking to diversify their pool of green investments, as there is considerable regulatory support particularly in developed countries.
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