FM Nirmala Sitharaman approves India’s first sovereign green bonds framework

Finance Minister Nirmala Sitharaman on Wednesday approved the final sovereign green bonds framework to fund environmentally sustainable projects. 

Green bonds are financial instruments that generate funds for investment in environmentally sustainable and climate-suitable projects. Also, green bonds command a relatively lower cost of capital compared to regular bonds.

Today’s approval will strengthen 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 Ministry of Finance said.

The proceeds generated from the issuance of such bonds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.

The framework comes close in the footsteps of India’s commitments under “Panchamrit” as elucidated by Prime Minister Narendra Modi at COP26 at Glasgow in November 2021.

The approval is the fulfillment of the announcement in the Union Budget FY 2022-23 by the Union Finance Minister that Sovereign Green Bonds will be issued for mobilising resources for green projects.

An independent and globally renowned organisation – CICERO –  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, the organisation has rated India’s Green Bonds Framework as ‘Medium Green’ with a ‘Good’ governance score, the ministry said.

In November last year, PM Modi, while speaking at COP26 Summit in Glasgow, presented five elements – Panchamrit – to deal with the climate change challenge.

“First- India will reach its non-fossil energy capacity to 500 GW by 2030. Second – India will meet 50 per cent of its energy requirements from renewable energy by 2030. Third- India will reduce the total projected carbon emissions by one billion tonnes from now onwards till 2030. Fourth- By 2030, India will reduce the carbon intensity of its economy by less than 45 percent. And fifth- by the year 2070, India will achieve the target of Net Zero,” he had said.