20 April 2015

India embrace green bonds to hit clean energy targets

The Indian government will ask leading financial institutions to raise funds for renewable energy expansion through the issuance of new green bonds, according to reports on Friday.

Public sector entities including Rural Electrification Corporation, Power Finance Corporation, IDBI Bank, Indian Renewable Energy Development Agency, along with private sector lending firms such as India Infrastructure Finance Limited, ICICI Bank, and Yes Bank, have all been asked to introduce green bonds to raise funds for clean energy projects.

The reports indicate that the bonds may be issued to foreign as well as domestic investors.

The Indian government has incentivised infrastructure bonds by making investing in them tax free and a similar approach may be followed to attract domestic investors.

Dollar-denominated green bonds may be issued to foreign investors and Yes Bank recently raised $150 million through India’s initial green bond issue, raising double the amount it had originally targeted.

The International Finance Corporation (IFC) has reportedly expressed interest in investing in India’s green bonds.

The Indian Export-Import Bank raised $500 million in India’s first dollar-denominated green bond issue.

India offers high deposit rates compared to developed nations where the green bonds market has been traditionally focused.

As a result rupee-denominated bond issues are expected to be much more attractive, as has been the case with the Yes Bank example.

India plans to increase its renewable energy capacity from the current level of 35 GW to 175 GW by 2022 and the target includes adding 97 GW of new solar power capacity.

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