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News:
- India must raise climate finance through Green Bonds.
Important News:
- Global population and Economic growth has caused global warming, increase in Carbon Dioxide emissions.
- India must raise climate finance through Green Bonds to tackle issues arising of climate change.
- What are Green Bonds:
- Green Bond is a debt instrument with which an entity raises money from investors and utilizes it to fund Green Projects (renewable energy, emission reductions and so on)
- It is recognized by United Nation Framework Convention on Climate Change (UNFCCC).
- Green bonds are issued by multilateral agencies such as the World Bank, corporations, government agencies and municipalities
- Important Facts:
- It was first issued by World Bank and European Investment bank in 2007
- The first Green Bond issue in India, was by Yes Bank in 2015 followed by the CLP Wind Farms India for Rs.600 crores for its wind portfolio.
- Why Green Bonds are important for India:
- To fulfill India’s goal in terms of renewable energy installations (target of building 175 gigawatt of renewable energy capacity by 2022).
- Budget allocations have been insufficient for renewable energy sector.
- Why Green Bonds an attractive option for India:
- Provide low cost, long term capital/loan for renewable energy projects.
- Provide access to wide range of domestic and international investors.
- Offer safeguard against carbon transition risks in portfolios that include emissions intensive areas (Transition of companies from Carbon intensive to Renewable source of energy)
- Major obstacles for India to raise Green Bonds:
- Inefficient Regulatory Monitoring Mechanism
- High Currency Hedging cost (way for a company to minimize or eliminate foreign exchange risk).
- Poor Sovereign Rating
- Lack of standardized reporting
- Exposure to credit risk
- India should strive for raising climate finance through innovation as it is capable of making differences in Green Economy.