Green Bonds
Context:
- Recently, the Reserve Bank of India (RBI) announced that it will, for the first-time, issue Sovereign Green Bonds (SgrBs) worth Rs 16,000 crore, in two tranches of Rs 8,000 crore each in the current financial year.
Importance of the Green Bonds:
- Green Bonds have become a crucial financial tool to address the concerns of climate change and associated difficulties during the past few years.
- According to the International Finance Corporation (IFC), a part of the World Bank Group, climate change creates concerns for agricultural, food, and water resources as well as communities and economies.
- To overcome these issues, substantial funding is required. In order to direct funds towards sustainable development, it is essential to link environmental projects with capital markets and investors.
- Green Bonds are one way to do this.
What are the advantages?
- Green Bonds give investors a forum to practice ethical behaviour, influencing the bond issuers’ business strategies.
- They offer a way to protect against the dangers associated with climate change while generating returns on investment that are at least comparable to, if not superior.
- According to the IFC, this is how the expansion of green finance and green bonds indirectly disincentivizes projects with large carbon emissions.
Government’s Stand:
- The Government stated in August of last year that it is committed to reducing the emissions intensity by 45% from 2005 levels by 2030 and achieving a cumulative installed capacity of electric power from non-fossil fuel sources of around 50% by the same year.
- The Union Budget 2022–23 announced plans to issue Sovereign Green Bonds as part of its pledge to considerably lower the economy’s carbon intensity.
Source The Hindu
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