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India’s Green Bonds support the drive to protect the environment
Green bonds are an effective way to raise funds to tackle the world’s most pressing environmental issues, and India is embracing them in a big way.
Many of the largest companies in countries around the globe are now investing in environmental stewardship initiatives.
The growing realisation that the quality and future of human existence is directly related to the condition of our natural environment generating greater interest in protecting it.
The bond markets, through green, social and sustainability bonds, play an essential role in attracting private capital to finance these global needs.
In these types of bond instruments the proceeds are exclusively applied to eligible environmental and/or social projects.
India enters the bond market
Initially characterised as a niche product, India entered the global green bond market in 2015, with the YES Bank issuing the first green bond for financing renewable and clean energy projects, particularly for wind and solar.
India next forayed into the global green bond market in June 2019 when Adani Green Energy, which develops, builds, owns, operates and maintains utility-scale grid-connected solar and wind farm projects, issued USD500m in environmentally-friendly bonds, raising USD362.5m by selling dollar bonds. This was the first 20-year green bond originating in India and was classed as investment-grade.
Shortly after, Greenko, one of the country’s leading renewable energy companies, raised green bonds worth USD950m.
Greenko has an operational capacity of 4.2 gigawatts across wind, solar and hydro projects and assets under construction that can generate 7 gigawatts.
It had previously raised USD1bn through dollar-denominated bonds in 2017 and in July 2019 its green bond issue was more than three times over-subscribed by global investors. This is the largest high-yield bond from India in 2019 and largest green bond in Asia. The bonds pricing was set at a yield of 5.5 % and the whole process was completed in five days.
Additionally, ReNew Power Limited, India’s largest renewable energy Independent Power Producer (IPP), successfully concluded a green bond issue of USD375m in the current year.
The U.S. dollar-denominated bonds received excellent response and were fully subscribed by leading fund managers, asset managers, banks and pension/life funds from across Asia, Europe and the U.S.
Successful product
The green bond segment has certainly been successful in the past few years especially for a nascent instrument.
By November 2018, total green bond issues in India had reached USD7.15bn, making the country the 12th biggest issuer in the world.
India has embarked on an ambitious target of building a renewable energy-generating capacity of 175 gigawatts by 2022, from just over 30 gigawatts now.
Clearly, this will require massive funding and creating a natural demand for the product in the long run.
For more information, contact:
Rajvi Shah
T: +91 22 30218508
E: rajvi.s@cas.ind.in
W: www.cas.ind.in
Chaturvedi & Shah LLP, Chartered Accountants, India
