Sean Kidney, CEO and Co-founder of the Climate Bonds Initiative (CBI), a not-for-profit initiative that works towards mobilizing funds for climate change initiatives, has described the Finance Minister, Nirmala Sitaraman’s announcement of issuance of sovereign green bonds as “an exciting development.” 

Speaking with Business Line on the phone from Australia, Kidney observed that India could make either a domestic or an international green bond issue, but he said he would recommend that an international issuance of a rupee-denominated green bond.

“The investors are ready and are waiting to invest,” Kidney, a long-time votary of a sovereign green bond from India, said. Green bonds are debt instruments whose proceeds will go to finance green projects which have an effect of reducing greenhouse gas emissions—such as renewable energy, energy efficiency. These bonds may not necessarily carry a lower interest rate—interest rates are a function of several factors such as the global economy, timing and the credit-worthiness of the issuer—but the bonds are still coveted because there are many investors who are interested in subscribing to them. Last December, globally green bonds worth $ 1 trillion were issued, which is a record. Several Indian companies have raised funds through of green bonds in the past, but there has been no sovereign (or government) issue till now.

The timing (now) is very good, he said. India, he observed, has made “substantial commitments” on climate action at the COP-26 climate conference held in Glasgow last November. “A green bond issue will back it,” he said. 

Further, Kidney noted that a sovereign green bond issue by India would catalyze similar issuances by corporate India. In this connection, Kidney noted that the Indian Railways Finance Corporation recently raised $500m. 

After India’s “enormous progress” in renewable energy, the next big story is the transport sector, he said. 

While countries like Germany and the UK have made sovereign green bond issues, China and the US have not. Kidney observed that India, therefore, has an opportunity to take a leadership position in sovereign green bonds.