The central government unveiled the Sovereign Green Bond Framework on Wednesday, which will outline the procedures and obligations of the government as a green bond issuer.
A Green Finance Working Committee has also been constituted to validate key decisions on issuance of the bonds.
Green bonds are financial instruments that generate proceeds for investment in environmentally sustainable and climate-suitable projects. Such bonds would command a relatively lower cost of capital vis-à-vis regular bonds and necessitate credibility and commitments associated with the process of raising bonds, the Finance Ministry said in a statement.
The government is expected to use the proceeds from sovereign green bonds to finance and/or refinance expenditure for eligible green projects falling under the framework’s ‘Eligible Categories’.
A document released by the Department of Economic Affairs on Wednesday highlighted that projects falling under the category would be public sector projects, which would curb the carbon intensity of the economy and help fulfill the country’s sustainable development goals.
The categories identified by the framework include:
Climate change adaptation.
Sustainable water and waste management.
Pollution prevention and control.
Sustainable management of living natural resources and land use.
Terrestrial and aquatic biodiversity conservation.
Of its Rs 5.92 lakh crore borrowing plan during the second half (October-March period) of this fiscal, Rs 16,000 crore was earmarked to be raised from issuance of green bonds.
The government’s total borrowing plan this fiscal stands at Rs 14.21 lakh crore, as opposed to the initially budgeted Rs 14.31 lakh crore, given the favourable tax collections.