Union Finance Minister Smt. Nirmala Sitharaman approves India’s First Sovereign Green Bonds Framework

Union Finance Minister Smt. Nirmala Sitharaman approves India’s First Sovereign Green Bonds Framework: The final framework for India’s sovereign green bonds has been approved by Union Minister for Finance and Corporate Affairs Nirmala Sitharaman. With this approval, India will be even more committed to meeting the goals outlined in its Nationally Determined Contribution (NDC) under the Paris Agreement. It will also make it easier to attract both domestic and foreign investment in green projects that qualify. The money raised from the sale of these bonds will be used to fund government initiatives that lower the economy’s carbon footprint.

What is Sovereign Green Bonds Framework?

• The Framework follows in the footsteps of India’s “Panchamrit” commitments as articulated by Prime Minister Shri Narendra Modi at COP26 in Glasgow in November 2021. The approval fulfills the Union Finance Minister’s announcement in the Union Budget FY 2022-23 that Sovereign Green Bonds would be issued to raise funds for green projects.
• In this context, India’s first Sovereign Green Bonds framework was developed, and the Green Finance Working Committee (GFWC) was established to validate key decisions on the issuance of Sovereign Green Bonds.
• CICERO, an independent and well-known Second Party Opinion (SPO) provider with a base in Norway, was chosen to assess India’s green bond framework and certify compliance with the ICMA Green Bond Principles and global best practices. After careful thought and deliberation, CICERO has given India’s Green Bonds Framework a “Good” governance score and a “Medium Green” rating.
• The proceeds from the issuance of such Green bonds will be used to fund public-sector projects that reduce the economy’s carbon intensity.

What are Green Bonds?

Environmentally friendly and climate-friendly projects can be funded with the help of financial instruments called “green bonds.” In comparison to regular bonds, green bonds have a lower cost of capital due to their indication of environmental sustainability, but they also require greater credibility and commitments during the bond-raising process. The European Investment Bank, the lending arm of the EU, issued the first green bond in 2007. They focus on clean transportation, clean water, sustainable water management, sustainable agriculture, fisheries, and forestry, as well as energy efficiency and pollution prevention.