Q. Consider the following statements with reference to the “Sovereign Green Bonds”:
1.Purchasing Sovereign Green Bonds exempts investors from paying taxes on their other investments, resulting in significant tax savings.
2.Investing in Sovereign Green Bonds guarantees a financial return equal to the value of the carbon emissions reduced by the issuing government.
3.Investing in Sovereign Green Bonds contributes to reducing a country’s national debt.
How of the statements given above are correct?
Statements 1, 2 and 3 are incorrect. Purchasing Sovereign Green Bonds does not typically exempt investors from paying taxes on their other investments. Tax treatment of investments can vary by country and region, but buying Sovereign Green Bonds does not automatically lead to tax exemptions on unrelated investments.
Investing in Sovereign Green Bonds does not guarantee a financial return equal to the value of carbon emissions reduced by the issuing government. The return on Sovereign Green Bonds is typically based on fixed interest rates or other predetermined criteria, not directly tied to emissions reduction.
Investing in Sovereign Green Bonds does not directly contribute to reducing a country’s national debt. These bonds are issued to raise funds for environmentally sustainable projects and are a form of government borrowing, which may add to the national debt rather than reduce it.
Sovereign Green bonds are fixed interest-bearing financial instruments issued by any sovereign entity/inter-governmental organization/corporation. The proceeds of these bonds are used only for environmentally conscious, climate-resilient projects.
Further, if a government wants to go global to raise funds, it needs to improve its credit rating as all bonds issued globally are closely linked to the credit rating of the issuing country.
Source: ForumIAS
