CEA on low green bonds 'greenium': Pvt investors need to walk the talk on sustainable investment

Chief Economic Advisor V Anantha Nageswaran

Chief Economic Advisor V. Anantha Nageswaran on July 22 said that private investors need to "walk the talk" on prioritising sustainable investments citing the low "greenium" from them on India's sovereign green bond offerings.

"This is not an issue peculiar to India. It is not that India is missing something, it is about private capital across the world and in India willing to walk the talk on investing in green projects," Nageswaran said in a briefing on the Economic Survey 2023-24.

The survey too highlighted this issue, stating that "despite securing a good rating on its green bond framework, Indian sovereign green bonds have hardly received any ‘greenium’ from private investors. It is more a ‘wall of capital’ than a ‘flood of capital’ that is waiting to fund energy transition in Emerging Markets and Developing Economies (EMDEs). It just isn’t mobile."

Greenium refers to the premium that the issuer receives on green bond issuances wherein investors are willing to accept lower yields on such debt instruments due to the sustainable nature of the projects financed by their proceeds.

India's ‘Framework for Sovereign Green Bonds’, released in 2022, was rated as ‘Medium Green’ with a ‘Good’ governance score by CICERO, a Norway-based Second Party Opinion provider.

In keeping with the ambition to significantly reduce the carbon intensity of the economy, the Union Budget 2022-23 announced the issuance of Sovereign Green Bonds. These instruments are expected to help the Indian government tap finances from potential investors for deployment in public sector projects with sustainable goals.

In 2022-23, the Centre raised Rs 16,000 crore through Sovereign Green Bonds, while the actual amount spent under the schemes eligible for financing through these bonds was Rs 16,923 crore. The additional amount of Rs 923 crore was incurred from the general revenues of the government. The first tranche of issuances fetched a greenium of 6 basis points (bps).

However, in FY24, the greenium seemed to have declined to around 2 bps for certain green bond issuances.

For FY25, out of the gross market borrowing of Rs 14.13 lakh crore, Rs 7.50 lakh crore (53.08 percent) is planned to be borrowed in the first half through dated securities, including Rs 12,000 crore through issuance of Sovereign Green Bonds.