India is set to issue its first ever green bonds, with the proceeds to be used to fund a range of clean energy projects. According to the government's green bond framework, released on Wednesday, the bonds will be used to fund solar power projects, followed by wind and small hydro projects. The proceeds will not be used to fund hydropower plants larger than 25 MW, nuclear projects, or any biomass-based power generation with biomass originating from protected areas.
The plan to issue sovereign green bonds was announced by Finance Minister Nirmala Sitharaman in the 2022/2023 budget, with the intention of using the funds to build green infrastructure. The government aims to issue INR 160bn ($1.93bn) of green bonds between October and March, with a green finance working committee, headed by Chief Economic Adviser V Anantha Nageswaran, responsible for selecting public sector projects for green financing from those submitted by government departments. The committee will be guided by environment specialists and representatives from the Ministry of Environment, Forests and Climate Change in choosing projects, and will annually identify new projects to be funded through green bonds.
The Oslo-based Centre for International Climate Research gave India's green bond framework a medium green rating in its second opinion, on par with ratings given to Indonesia's and Kenya's frameworks, but lower than the dark green rating given to Denmark and Iceland. India follows Singapore, Hong Kong, and Indonesia as an Asian issuer of sovereign green bonds.
The Indian government sought assistance in developing its green bond framework from the World Bank and CICERO Shades of Green, a Danish firm that helps with environmental assessments of green bond frameworks. The panel will ensure that the proceeds from the bonds are allocated within 24 months of their issuance.
This move by the Indian government is a significant step in its efforts to tap the domestic debt market to finance clean energy projects and move towards a more sustainable future. It is encouraging to see a commitment to using the proceeds from these bonds for a range of clean energy projects, and the involvement of environmental specialists in the selection process will ensure that the funds are used in the most effective and responsible way possible.