On January 25, India will issue the first tranche of its $2 billion green bond issuance commitment. Though this sovereign issuance is just around 0.2 percent of the total net issuance for the year, it will mark India’s much-awaited entry into the environmental, social and governance (ESG) debt market, which is estimated by Bloomberg to be worth $15 trillion by the year 2025. With the enactment of the Green New Deal (GND) in the US, which will govern a major part of America’s transition into a sustainable economy, along with influential green activists active in the debt market, stakes are indeed high.
India’s green bond issuance comes after the formal introduction of the Framework for Sovereign Green Bonds (FSGB), which is in line with the country’s Sustainable Development Goals (SDG). The thinking behind the green bond issuance is to seek out international investors, who give climate change mitigation a priority and help India achieve its climate change targets.
The government of India intends to use the resultant proceeds in the financing/refinancing of projects under certain identified categories, which include renewable energy and energy efficiency, clean transportation, climate change adaptation, green buildings, pollution prevention and control, sustainable management of living natural resources and land use, sustainable water & waste management, climate change adaptation, and territorial & aquatic biodiversity conservation.
This initiative is part of India’s Nationally Determined Contributions (NDCs), coverage of which is mandatory under the United Nation Framework Convention for Climate Change (UNFCCC). The Sharm el-Sheikh climate accord (COP 27), and its precedent Paris accord (COP 26) already require India to commit guarantees such as a reduction of its GDP’s emissions intensity by 45 percent (from year 2005 levels) by 2030. As a ratifying member of the relevant UN charters on climate change mitigation, India has recently submitted its strategy document listing ways in which it plans to achieve carbon neutrality by 2070.