India reached a major milestone in its nascent green bonds market when recently the International Finance Corporation invested in the country’s first regulator-approved green bond.
L&T Infrastructure Finance Company raised ₹677 crore ($103 million) from the IFC for a green bond. Proceeds from the bond will be used for funding solar power projects.
More than a third of the $3.5 billion debt funding provided by L&T Infrastructure Finance Company is towards renewable energy projects. This could increase significantly as project developers in India look to funding resources apart from traditional banks.
The bond issue is the first one approved by the Securities and Exchange Board of India (SEBI). The IFC has invested millions of dollars in other green bonds in India. It recently invested $75 million and $50 million in bonds issued by Yes Bank and PNB Housing Finance, respectively.
With the SEBI regulations in place, more financial companies, banks and developers may look to raise funds through green bonds. SEBI regulations also state provisions for listing these bonds at Indian bourses which would make them an attractive bet for Indian asset management companies as well, which manage billions of dollars of retail investments.
IFC investing in Indian green bonds remains an encouraging trend for Indian banks and financial institutions which are planning to raise millions of dollars through these rapidly emerging debt instruments. The Indian government has already given the go-ahead to several public sector companies to raise a total of $1 billion though green bonds.