Sovereign Green Bonds

Why in news?

• Union Finance Minister in the Budget 2022 announced that the government proposes to issue sovereign green bonds to mobilise resources for green infrastructure.

About Sovereign Green Bonds:

• Green bonds are issued by companies, countries and multilateral organisations to exclusively fund projects that have positive environmental or climate benefits and provide investors with fixed income payments.
  • Sovereign Green Bonds are Green Bonds issued by national governments.
• The projects can include renewable energy, clean transportation and green buildings, among others.
• Proceeds from these bonds are earmarked for green projects. This is unlike standard bonds, the proceeds of which can be utilised for various purposes at the discretion of the issuer.
• Green bonds issuers are also required to provide details regarding the project they intend to finance as well as its expected climate and environmental impacts.
• The green bond market has seen cumulative issuance worth more than USD1 trillion since market inception in 2007.
• By the end of 2020, 24 national governments had issued Sovereign Green, Social and Sustainability bonds totalling cumulative USD 111 billion dollars.

PRACTICE QUESTION:

With reference to ‘Green Bonds’, consider the following statements:

1. India is the first country to issue Sovereign Green Bonds

2. Municipalities in India are ineligible to issue Green Bonds

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer