India to launch sovereign green bonds, here's how they work

India will issue sovereign green bonds for funding green infrastructure, Finance Minister Nirmala Sitharaman said in her Budget speech. Green bonds are debt instruments that differ from conventional fixed-income securities only in that the issuer pledges to use the proceeds to finance projects that are meant to have positive environmental or climate effects. Since its debut in 2007, the green bond market has been growing steadfastly.

The money will used for projects that will help reduce carbon intensity of the economy. Sovereign green bonds will be part of government’s borrowing programme in FY23. Proceeds, Sitharaman said, will deployed in public sector projects.

The move is big boost especially with India making aggressive strides towards a low-carbon economy with ambitious targets like achieving a robust 175 gigawatt of renewable energy capacity by the year 2022. Such targets require massive funding