A Bird’s Eye View on GREEN BONDS

A bird eye view on Green Bonds 

India has promised to cut down its emissions to net zero by 2070 which was mentioned by Hon’ble PM in 2021 at the UN Climate COP26 held at Glasgow. The same was echoed by Hon’ble FM in the recent budget speech in 2023 and made an attempt to include in the budget proposals.

In the union Budget 2022-23 Hon’ble FM of India has mentioned as below 

“As a part of the government’s overall market borrowings in 2022-23, sovereign Green Bonds will be issued for mobilizing resources for green infrastructure. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.”

Introduction of Green Bonds:


Green bonds trend started in 2007 with European Investment Bank and the World Bank and with few others. Global issuance of green bonds in 2013 and 2014 were USD 11 Bn and USD 36.6 Bn respectively) 


What are Green Bonds? Is green bond different from other bonds?

Green1 bond is like any other bond which is debt instrument however the main difference being the proceeds of the same should be for ear marked purpose for financing only “Green “Projects. 


What is considered as “Green”?

"What constitutes Green" will be formalised keeping in view the requirements as proposed in the consultation paper and the "Climate Bond Standard report" by Climate Bonds Initiative ( Ref : https://www.climatebonds.net/resources/reports


Who will monitor the issue of Green Bonds in India?

The issuance of Green Bonds in India, shall be governed under SEBI (Issue and Listing of Debt Securities) Regulations, 2008(‘ILDS Regulations’)


Who will issue the Green Bonds in India?


RBI will issue the green bonds in India. The RBI planned to auction 5 year and 10-year green bonds worth 40 billion rupees on Jan 27th and on Feb 9th, 2023, in a uniform action price. The first tranche which was auctioned on Jan 27th was picked by local banks, insurance companies and few foreign banks. 


What are green debt Security as per SEBI?

Green debt security” means a debt security issued for raising funds subject to the conditions as may be specified by the Board from time to time, to be utilized for project(s) and/ or asset(s) falling under any of the following categories: 

  1. renewable and sustainable energy including wind, bioenergy, other sources of energy which use clean technology, 
  2. clean transportation including mass/public transportation,
  3. climate change adaptation including efforts to make infrastructure more resilient to impacts of climate change and information support systems such as climate observation and early warning systems,
  4. energy efficiency including efficient and green buildings, 
  5. sustainable waste management including recycling, waste to energy, efficient disposal of wastage, 
  6. sustainable land use including sustainable forestry and agriculture, afforestation, 
  7. biodiversity conservation,
  8. pollution prevention and control (including reduction of air emissions, greenhouse gas control, soil remediation, waste prevention, waste reduction, waste recycling and energy efficient or emission efficient waste to energy) and sectors mentioned under the India Cooling Action Plan launched by the Ministry of Environment, Forest, and Climate Change, 
  9. circular economy adapted products, production technologies and processes (such as the design and introduction of reusable, recyclable and refurbished materials, components and products, circular tools, and services) and/or eco efficient products, 
  10. blue bonds which comprise of funds raised for sustainable water management including clean water and water recycling, and sustainable maritime sector including sustainable shipping, sustainable fishing, fully traceable sustainable seafood, ocean energy and ocean mapping, 
  11. yellow bonds which comprise of funds raised for solar energy generation and the upstream industries and downstream industries associated with it 


The said amendment was as per the notification dated 2nd Feb 2023 - SEBI/LAD-NRO/GN/2023/119 , in the SEBI(Issue and Listing of Non- Convertible Securities) Regulations 2021.


Benefits of Green bonds:

  • It will increase the reputation of the issuer as they are more concerned on the ESG aspects and their commitment for a sustainable environment. 
  • Being ear marked there will be global pool of funds for ear marked purpose the sustainable projects will get sufficient funds so projects can be done without delays and diversification of funds on environmental Social and Governance projects can be taken care. 
  • The pricing advantage over the regular bonds will make the investor to invest in. 
  • It will get an opportunity to be part of making the world a sustainable living space. 


The Network requirements, Rating Parameters, Record of the issuer places a vital role in selecting the issuers. Green Bond Market in India is in a promising stage, the same shall be issued in the initial stage by the issuers on a private placement basis with the appointment of merchant Bankers made mandatory so that proper procedures and safety requirements are in place for the safety of the funds utilised. 


The objective of the sustainable objectives should be noticeably clear and transparent so that the funds are utilised for the green sustainable projects only as the funds are to be ear marked and any changes in the utilisation of the funds should be clearly informed before hand as the basic condition will be violated if there is change in the utilisation of funds. 


United Nations Framework Convention on Climate Change (UNFCCC) may be used to define such impact and the outlined benefits may be subject to validation by the certifier or validator for the projects for which the funds will be used. 


Process of Evaluation the projects: 


Ministry of Finance has constituted a “Green Finance Working Committee” (GFWC) with representation from various ministries and chaired by Chief Economic Adviser, Government of India and based on the ministry/department in consultations and experts the projects will be evaluated from time to time.


Management of Proceeds: 


The application of the proceeds may also be verified/accompanied by the report of an external auditor, or other third party, to verify the internal tracking method and the allocation of funds towards the projects, from the Green Bond proceeds was used for the ear marked purposes and any deviations will be penalised. 


The details of the system/procedures to be employed for tracking the advances of the issue including the funds made and/or assets earmarked for eligible projects and the same shall be validated by the external auditors.


What happens if any deviation of the specified projects: 


Transparency and commitment are the key for these types of project so the issuer has to inform before hand the funds utilised during the year on the projects and unutilised funds lying with them and the same can be made as investments in money market instruments, liquid mutual funds, bank deposits etc upon the approval of the investors. 


As far as the second opinion it is made voluntary considering the global standards about reviewing/verifying the issuer’s green assets/ framework for the projects. 


Regarding the confidentiality of the data the same can be limitedly made available in broad terms. However, the issuer has to put in place the systems/procedures to track the usage of green bond proceeds and the same shall be verified by external auditors from time to time. 


It is a very early stage of Green bonds in India and India being holding the G20 Presidency this year was more particular in sustainable projects and even Finance bill 2023-24 has mentioned some notable projects related to the same and we should strive more hard and committed to attain the sustainable goals so that the environment will be a better place to live in for the generations to come . 


PS: The above is for education purpose only. The author can be reached – Aravinda.garikipati@gmail.com , CA Aravinda Garikipati 


1. https://www.sebi.gov.in/sebi_data/meetingfiles/1453349548574-a.pdf  

2. https://egazette.nic.in/WriteReadData/2023/243370.pdf  

3.https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-  handbooks/green-bond-principles-gbp/

4. https://dea.gov.in/sites/default/files/Framework%20for%20Sovereign%20Green%20Bonds.pdf

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