Green Bond: Things You Must Know

December 12, 2016 Share Like Labels: bet

A green bond is a debt instrument issued by an entity like any other bond (with subtle differences) to raise funds from investors

Initially, green bonds were issued by World Bank, multilateral organizations and few nations from 2007
Green bonds are pioneered by development banks in few nations
Green bonds is a niche product till 2012
Green bonds are focused to Environment, Social and Governance (ESG) projects
There is the double scope of environment benefit and development in green bonds
Green bond concept is open to corporate from 2016 in India
It is a new concept with regulations and guidelines still in the initial stages

Green bond is issued to finance only green projects
Green bond issuer explicitly states that the fund raised will be used for environmental benefit activities like renewable energy, solar projects etc
Green bonds are being used based on market practices
Issuer can price Green bonds at a far better rate than the regular bonds due to the environmental benefit feature

Green bonds help to increase the reputation of the issuer
Issuer will get positive publicity
Green bonds develop a commitment among the corporate about sustainability and development of the environment
Green bonds will give an international experience
Positive public relations will be enhanced
New set of investors will come in to the fray with the introduction of green bonds
Issuer can get access to a diversified set of investors other than business oriented clients or investors
Issuer will get a pricing advantage in case of green bonds
The current scenario of global warming and climate change will attract global investors to invest in green bonds in large numbers
The cost of funding for the green projects will be lowered with the expected increasing number of investors in the green bonds

Green bonds is relatively a new concept to Indian market
SEBI must frame guidelines for issuing green bonds to prevent the misuse of funds raised through green bonds
SEBI must establish a monitoring mechanism to check the usage of the green bonds
World nations are responding in a positive manner to the climate change scenario with the signing of the Conference of Parties (COP) in Rio by majority of the nations
GOI has placed special emphasis on renewable energy projects especially on solar power generation making it conducive for green projects
The reception of green bonds in India is on the positive side
Overall, Green projects and green bonds offer huge opportunities in future for corporate for the overall development of the nation and the world as a whole

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