Even though the cost of green bonds continues to be high in India, the issuances of such bonds are expected to pick up in the remainder of the current financial year following the announcement of the government’;s borrowing plan, according to SBI Chairman Dinesh Kumar Khara.

“Rupee-denominated green bond issuances by Indian corporates are expected to pick up in the second half of FY24 as pricing reference is now available in the form of government-issued green bonds,” Khara said at the FICCI ESG Summit on Monday.

The government issued green bonds worth ₹16,000 crore in FY23 and plans to raise another ₹20,000 crore via such bonds in FY24.

While green bonds are currently at a nascent stage, accounting for only 0.7 per cent of total bond issuances since 2018, over the next couple of year, the share of green bonds will rise to about 8-10 per cent of total bonds, Khara said.

India is estimated to require an investment of nearly $600 million annually to achieve its sustainable development goals, for which the country needs to grow the flow of global capital, including from sovereign debt funds, global private equity, and infrastructure funds.

“At the bank level we have started working out the risk matrix of our borrowers wherein we give some special credits to those embarking on green initiatives,” Khara said, adding that the bank is also working to estimate the carbon footprint of it’s ₹33 lakh crore portfolio, at an individual loan level, with the objective of mitigating climate risks and providing sustainable finance.

Green washing

Cautioning against ‘green washing’ in the green bond space, he called for better project reports to reduce information asymmetry, a policy framework for standardisation of green investment and to boost awareness of the green finance ecosystem, and auditing standards for better corporate reporting by helping corporates build annual databases .

Domestic companies have raised $43 billion of green finance since 2014, making India the sixth-largest issuer of green bonds in the entire Asia-Pacific region, Khara said, adding that the market for solar energy ‘yellow’ bonds and marine ‘blue’ bonds is also picking up.

India aims to become a net-zero carbon emissions economy by 2070, for which it intends to source 50 per cent of its energy from non-renewable sources by 2030. The 2030 target will necessitate an annual investment of roughly $110 billion in India, he said, adding that the “investment required to chart the net-zero emission roadmap will be considerably greater.”

An overall investment of $275 trillion will be required for global spending on physical assets to reach net-zero by 2050.