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