Sovereign Green Bonds: what are they and how do they benefit investors?
Finance Minister Nirmala Sitharaman gave her approval to the final Sovereign Green Bonds framework for India on November 9 2022.
Unlike other government bonds, green bonds have a specific purpose for using funds . A sort of financial product called a “green bond” is intended to fund or refinance projects that help the environment or the climate. In addition to helping India’s efforts to switch to more environmentally friendly energy sources, green bonds will make it possible for renewable energy-based green infrastructure projects to get finance.
Green bonds may provide investors with a variety of advantages, according to S Ravi, a former BSE chairman and the founder and managing partner of Ravi Rajan & Co. Following is a list of them:
- Tax incentives may include tax credits or tax exemptions, depending on the issuer and the jurisdiction
- Invest directly in initiatives that enhance sustainable ventures
- Revenue management will be made more transparent and accountable, leading to the creation of enhanced risk management tools
- Benefits to society and the environment in addition to comparable financial gains.
The Intergovernmental Panel on Climate Change (IPCC), a division of the United Nations that focuses on climate change, published a study in 2007 linking human activity to global warming. As a result, Swedish pension funds began to support environmentally friendly businesses. As a result of the increasing demand for green bonds, the World Bank issued the first green bond in 2008. Since its introduction, the green bond market has seen an amazing surge.
Green bonds accounted for US$116 billion of global bond issuance in the first quarter of 2022, making them the most widely used sustainability, social, and bond type.
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