Sovereign Green Bond Auction introducing first time in India

On January 25, the Reserve Bank of India (RBI) staged the very first auction for Rs 8,000 crore worth of Sovereign Green Bonds (SGrBs).

This will be the first of two bids the RBI will undertake this academic year, with a total bidding value of Rs 16,000 crore for sovereign green bonds.

A “green bond” promises to only utilise the money obtained to finance or re-finance “green” projects, investments, or commercial operations. This distinction sets it apart from regular bonds.

Like every other credit, a green bond is a fixed-income tangible asset that is used to acquire funds from investors through the debt stock exchange.

In order to repay the principal, when the terms are met and to pay a specified interest rate (coupons), the bond issuer normally collects a certain quantity of cash from investors over a set period of time (maturity).

India has promised to lower the total emissions of its economy by 45% from its 2005 level by 2030 and to reach a collective average output of power production from non-fossil fuel-based oil reserves of roughly 50%.

The country has up to now funded the majority of the local resources utilised for climate policy; however, it is now attempting to raise extra global financial resources in order to accomplish its carbon neutrality.

To considerably reduce carbon emissions and promote sustainable livelihoods, the Union Budget 2022–23 announced the issuing of Sovereign Green Bonds.

With the aid of the sale of Sovereign Green Bonds, the administration will be able to draw the required money from possible investors as a part of the entire market borrowings.

The civil service will then utilise these monies for initiatives that promote resource usage that is energy-efficient, reduce carbon emissions, enhance natural ecosystems, and boost wildlife, all of which will reduce the economy’s carbon output.

The RBI is holding a bidding for two green bonds having a nominal value of Rs 4,000 crore each and periods of between five and ten years. The two assets up for sale on January 25, 2023, were known as New GOI SGrB 2028 and New GOI SGrB 2033.