India A Fast-Emerging Green Bonds Market, Says Climate Bonds Initiative

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After China, India is the only developing country in the top 10 labeled green bonds market in terms of issuance, a recent report by the Climate Bonds Initiative notes.

The cumulative issuance of labelled green bonds in India this year stood at $2.7 billion up to early October 2016, which makes it the 7th largest issuer globally. Climate Bond Initiative also notes the best practices being followed by various Indian companies as well as government institutions.

Five of the seven bonds issued in India this year were either certified or reviewed by external auditors. Green bonds issued by Hero Future Energies, Axis Bank, ReNew Power Ventures, and NTPC were certified against Climate Bonds Standard. These green bonds raised a total of US$915 million. A $500 million issue by Greenko Energy Holdings was reviewed by Sustainalytics.

Climate Bond Initiatives also notes that India is the only country, apart from China, to have issued national-level guidelines for issuance and listing of green bonds at stock exchanges.

Earlier this year, the Securities and Exchange Board of India (SEBI) issued final guidelines on the issuance of green bonds. The Board has not stated a blanket definition of green bonds and will specify it ‘from time to time’. The Board made optional the requirement for independent third party reviewer/certifier/validator, for reviewing/certifying/validating the pre-­issuance and post-issuance process, including project evaluation and selection criteria. However, it will be mandatory for the issuer to make disclosures including use of proceeds, list of projects to which Green Bond proceeds have been allocated, etc., in the annual report/periodical filings made to the stock exchanges.

The green bonds market in India was first tapped by private sector banks in early 2015. However, now public sector entities are also looking to significantly increase their issuance through masala bonds.

The long list of Indian companies planning rupee-denominated green bonds include Power Finance Corporation, NTPC, Neyveli Lignite, PTC India, and Rural Electrification Corporation. The masala bonds (as rupee-denominated bonds are commonly referred) will be listed in the UK, possibly on the London Stock Exchange. Piyush Goyal, Minister of Power, said that these bonds are likely to have small sizes of $150-200 million, and have tenors of 5 to 7 years.

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