Sovereign Green Bonds Framework

The Sovereign Green Bonds framework of India was approved by the Government of India during November 2022.

This approval further strengthens India’s commitment towards its Nationally Determined Contribution (NDCs) targets, adopted under the Paris Agreement, and help in attracting global and domestic investments in eligible green projects. The proceeds generated from issuance of such bonds will be deployed in Public Sector projects which help in reducing carbon intensity of the economy.

The Framework comes close on the footsteps of India’s commitments under “Panchamrit”.  

What are green bonds

Green bonds are financial instruments that generate proceeds for investment in environmentally sustainable and climate-suitable projects. By virtue of their indication towards environmental sustainability, green bonds command a relatively lower cost of capital vis-à-vis regular bonds and necessitates credibility and commitments associated with the process of raising bonds.

A ‘green project’ classification is based on the following principles:

• Encourages energy efficiency in resource utilization
• Reduces carbon emissions and greenhouse gases
• Promotes climate resilience and/or adaptation
• Values and improves natural ecosystems and biodiversity especially in accordance with Sustainable Development Goals (SDG) principles

In the above context, India’s first Sovereign Green Bonds framework was formulated and as per the provisions of the framework, Green Finance Working Committee (GFWC) was constituted to validate key decisions on issuance of Sovereign Green Bonds. 

Further, CICERO, an independent and globally renowned Norway-based Second Party Opinion (SPO) provider, was appointed to evaluate India’s green bonds framework and certify alignment of the framework with ICMA’s Green Bond Principles and international best practices. After due deliberation and consideration, CICERO has rated India’s Green Bonds Framework as ‘Medium Green’ with a “Good” governance score.

To download the report, click here. 

Source : Department of Economic Affairs, Ministry of Finance