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Sovereign Green Bonds

2023 JUL 24

Preliminary   > Economic Development   >   Indian Economy and Issues   >   Financial market

Why in news?

  • The Pension Fund Regulatory and Development Authority (PFRDA) will allow pension funds to invest in sovereign green bonds that the government is expected to issue in the second half of the current financial year.

About Sovereign Green Bonds:

  • Green bonds are an instrument to raise money, at a lower cost than regular bonds, for environment-friendly projects.
  • The concept goes back only 16 years when a group of Swedish pension funds wanted to invest in green projects as climate worries grew.
  • A sovereign green bond is a debt instrument issued by the central or state government to borrow money from investors with the commitment that the mobilized fund will be spent on climate or eco-system related activities.

Add ons:

  • Yes Bank was the first Indian Bank to issue Green Infrastructure Bonds (GIBs) in India in 2015.
  • Corporates have been issuing green bonds in India for a few years, but the country’s global share stood at just 1% in the first half of 2022.

PRACTICE QUESTION:

Consider the following statements:

1. India is the first country in the world to issue sovereign green bonds

2. In India, private players cannot 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