- Recently, the Reserve Bank of India has reported that the cost of issuing green bonds is higher than other bonds.
- The average coupon rate for green bonds with a maturity period between 5 and 10 years issued after 2015 is generally higher than for corporate and government bonds.
- However, the coupon rate for green bonds of 10 years or more for the US dollar was lower than corporate bonds.
- It is known that most of the green bonds in India are issued by public sector units or corporate with better financial condition.
- Private sector green bond issuers provided less information on debt-to-asset ratios than its non-issuers.
- As of March 2018, green bonds were only 0.7% of the total bonds issued in India, while according to 2020 data, bank loans given for non-conventional energy account for 9% of bank dues on the energy sector.
- High borrowing costs have been the most important challenge in this and this was mainly due to asymmetric information.
- In this context, a better information management system needs to be developed in the country, which will help in reducing the maturity period mismatch and cost borrowing and efficient resource allocation in this area.
- Green bonds are like other bonds, but through these only investments can be made in green i.e. environmentally friendly projects.
- These include projects such as renewable energy, low carbon emissions, clean transportation and adaptation to climate change.
- The bonds were first introduced in 2007 by the World Bank and the European Investment Bank.
- The first green bonds in India were issued by Yes Bank in the year 2015.
Source – The Hindu