The Hindu Business Line

Ex­perts urge Cen­tre to go in for a sov­er­eign green bond is­sue

So far 12 govts have made 23 green bond is­sues, for $47.5 b

- M RAMESH Bonds Market · Finance · Financial Markets · Business · Bank of America · United States of America · Rockefeller Foundation · India · China · France · Netherlands · Chile · United Nations · United Nations

The gov­ern­ment is keen on com­ing out with a sov­er­eign bond is­sue for the first time, to raise some­where in the neigh­bour­hood of $10 bil­lion. Some ex­perts are urg­ing the gov­ern­ment to make it a sov­er­eign green bond is­sue.

A big backer of such a move is Sean Kid­ney, Co­founder and CEO of Cli­mate Bonds Ini­tia­tive, a NGO set up with fund­ing from banks such as HSBC and Bank of Amer­ica and other or­gan­i­sa­tions like Rock­e­feller Foun­da­tion for mo­bil­is­ing debt fi­nance for cli­mate solutions.

He wants the gov­ern­ment to come out with a $10-bil­lion green bond is­sue, which will make “an in­cred­i­ble splash” in the world mar­kets.

Green bonds are sim­i­lar to other debt in­stru­ments ex­cept that their use for green projects is con­firmed by third party cer­ti­fy­ing agen­cies. There are funds that will not in­vest in non­green projects — so th­ese will crowd into green bond is­sues. “In­dia will then seize the global po­lit­i­cal lead­er­ship,” Kid­ney told Busi­ness Line, not­ing that in do­ing so, In­dia would beat China, which is the sec­ond big­gest green bond is­suer but has never is­sued a sov­er­eign green bond.

China has a much higher ex­ter­nal debt to GDP ra­tio, of around 14 per cent, com­pared with In­dia’s 2.6 per cent. An In­dian sov­er­eign is­sue could get a bet­ter rat­ing and there­fore a bet­ter price.

Asked if In­dia would get a bet­ter price, Kid­ney said, “noth­ing is cer­tain in the bond mar­ket, but we are see­ing the be­gin­ning of price ad­van­tage in sovereigns.”

France, The Nether­lands and Chile got “gree­nium” (green pre­mium or a bet­ter price) for their bonds, he said, adding that In­dia could get one too.

For green bonds is­sue, the gov­ern­ment would have to get it cer­ti­fied by agen­cies that the pro­ceeds will be used for cli­mate­friendly projects. All re­new­able en­ergy, bet­ter trans­port and wa­ter projects will qual­ify, Kid­ney said.

Data pro­vided by Cli­mate Bonds Ini­tia­tive shows that so far 12 gov­ern­ments have made 23 green bond is­sues, for $47.5 bil­lion. No­tably, of this, $18.4 bil­lion came in the first half of 2019.

The Nether­lands borrowed €5.98 bil­lion in May. Ac­cord­ing to a Bloomberg report, it was the first sov­er­eign green bond ever sold by a triple-A rated coun­try and it at­tracted sub­scrip­tions worth €21.2 bil­lion in less than two hours of open­ing.

Kid­ney is not alone in call­ing upon the gov­ern­ment to is­sue a green sov­er­eign. Nathan Fabian, Chief Re­spon­si­ble In­vest­ment Of­fi­cer at Prin­ci­ples for Re­spon­si­ble In­vest­ments, a United Na­tions-sup­ported NGO, is also in favour of such an ini­tia­tive.

“Global in­vestors some­times strug­gle to un­der­stand the op­por­tu­ni­ties in In­dia, but the In­dian gov­ern­ment can build con­fi­dence and in­ter­est of global in­vestors with a cer­ti­fied green bond is­sue of its own,” Fabian told Busi­ness Line in an email.

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