Abstract
In order to attain its Intended Nationally Determined Contribution (INDC) goals to address the climate change challenge, India needs a hefty investment of $200 billion as climate finance. In this context, the transition towards a ‘low-carbon economy’ is entirely dependent on the mobilization of large financial resources. Green-bond issuance was also officially recognized by the United Nations Framework Convention on Climate Change (UNFCCC) as a ‘climate action’ ahead of the 21st Conference of the Parties (COP21) in Paris. Leveraging the debt market, green bonds—which finance environment-friendly businesses and assets— have emerged as an innovative financial tool in recent years, serving as a successful bridge between capital markets and the need to address climate change. The present study aims to comprehend the concept of green bonds and to provide a comprehensive assessment of the green-bond market in the Indian and global contexts. The study also intends to highlight the key historical and international trends related to green-bond issuances with exclusive reference to India. It further probes the country’s experiences, milestones, challenges faced so far, opportunities that lie ahead, as well as the ways green bonds have helped leverage and sustain broad clean deployment in India till now. The study intends to look into issues related to the financial performance via green-bond indices, market pricing, and risks pertaining to green bonds as compared to conventional bonds. The study is secondary in nature and relies on secondary sources for analysis, such as the Climate Bonds Initiative, Bloomberg New Energy Finance, Green Bonds Database, Reuters, USAID, Dealogic, OECD, Standard & Poor’s, and so on. The study is based on descriptive and non-empirical graphical analysis since the area of research is quite new in the emerging markets, and hence sufficient data regarding the same is not available. The study concludes with certain policy recommendations for deepening and expanding the green-bond market in India to scale up a cleaner infrastructure ecosystem.