In Short:
India’s sovereign green bonds are not attracting good premiums from private investors, hindering the funding of green projects. The country’s framework for green bonds has been well-rated, but the lack of ‘greenium’ shows a global issue. Developing nations struggle to access affordable finance for climate commitments, relying on loans rather than grants. Developed countries must provide resources to meet the $2.5 trillion required for 2015-2030.
Hey there! So, the latest Economic Survey has some interesting insights about India’s sovereign green bonds. It seems that these bonds haven’t been attracting much attention from private investors, which is a bit of a bummer when it comes to raising funds for green initiatives.
Funds mobilisation
The Survey highlights that even though India released a Framework for Sovereign Green Bonds in 2022 to attract funds for green projects, private investors haven’t been jumping on board. The bonds were rated as ‘Medium Green’ with a ‘Good’ governance score, but it seems like the ‘greenium’ (green premium) is missing.
India issued sovereign green bonds worth ₹16,000 crore in early 2023 and another ₹20,000 crore later in the year, but it seems like the flow of finance for green projects is still stuck.
The Chief Economic Advisor pointed out that low premiums on green bonds are not just an India-specific issue, but a global one. Looks like we’ve got some work to do in attracting investors to fund green initiatives.
Financing green energy transition
The Survey also mentions that developing countries, like India, face challenges in accessing enough financial resources for implementing climate commitments. Finance from developed countries has been limited, mostly in the form of loans rather than grants.
With a resource requirement of $2.5 trillion for 2015-2030 as per India’s nationally defined contributions, there’s a clear need for more support from developed nations in line with the UNFCCC and Paris Agreement objectives.
The survey emphasizes the importance of developing countries receiving adequate financial resources to support their climate actions and warns against overlooking other critical developmental issues while focusing solely on climate change as a global emergency.
