Sovereign Green Bond (SGB) Framework

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Sovereign Green Bond (SGB) Framework

Recently the Ministry of Finance has approved India’s first Sovereign Green Bond (SGB) framework.

Green Bond is a fixed-income instrument. It is specifically designed to support climate-related or environmental projects.

SGBs are issued by the government. Earlier, the release of SGBs was announced in the Union Budget 2022-23.

Key Features of SGB Framework

The ‘Green Project’ classification is based on the following key principles:

Encourage energy efficiency,

Reducing carbon and greenhouse gas (GHG) emissions etc.

Eligible projects under this framework include:

  • Renewable Energy, Clean Transportation, Water and Waste Management, Green Building etc.
  • Projects that are not eligible: Nuclear power generation, landfill projects, direct waste incineration, hydroelectric plants with a capacity of more than 25 MW, etc.
  • The Green Finance Working Committee has been constituted to approve major decisions taken on issuance of SGBs.
  • The proceeds from the Green Bond will be credited to the Consolidated Fund of India.

Importance of SGBs

  • Global and domestic investments will be attracted in eligible green projects.
  • Positive public relations will help enhance the reputation of the issuer.
  • Investor diversification will help in attracting capital from different parts of the world.
  • There will be transparency and accountability in the use and management of income.
  • It will help in national climate adaptation, food security etc.
  • Green Bonds in India: In the year 2017, the Securities and Exchange Board of India (SEBI) issued disclosure norms for green bonds.
  • Under this, the issuer has to disclose the environmental objectives of issuing such securities.
  • India’s first Green Bond was issued by Yes Bank Limited in the year 2015.

Source – The Hindu

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