Green Bonds

In Context 

• The government proposes to issue sovereign green bonds to mobilise resources for green infrastructure. 

About 

• The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.
  • The issuance of sovereign green bonds is part of the government’s overall borrowing programme.
• These rupee-denominated papers will have a long tenure to suit the requirement of green infrastructure projects.

What is Green Bond?

• It is a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects. 
  • The first green bond was issued in 2007 by the European Investment Bank, the EU’s lending arm. 
  • This was followed a year later by the World Bank. Since then, many governments and corporations have entered the market to finance green projects.
• These bonds are typically asset-linked and backed by the issuing entity’s balance sheet, so they usually carry the same credit rating as their issuers’ other debt obligations.
• They are designated bonds intended to encourage sustainability and to support climate-related or other types of special environmental projects. 
• Aims and Objectives: 
  • They are aimed at energy efficiency, pollution prevention, sustainable agriculture, fishery and forestry, the protection of aquatic and terrestrial ecosystems, clean transportation, clean water, and sustainable water management.
  •  They also finance the cultivation of environmentally friendly technologies and the mitigation of climate change.

Source: TH