Framework for Sovereign Green Bonds

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    In News

    • Recently, the Ministry of Finance has finalized the framework to issue Sovereign Green Bonds in line with global standards.
      • The issuance would be in line with the Budget announcement.

    About green bonds

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    • Meaning:
      • Green bonds are financial instruments that generate proceeds for investment in environmentally sustainable and climate-suitable projects. 
      • The phrase green bond is sometimes used interchangeably with “climate bonds” or “sustainable bonds.”
    • Projects :
      • The proceeds will be deployed in public sector projects, which help in reducing the carbon intensity of the economy
      • It would be used to fund renewable energy, energy efficiency, clean transportation, water and waste management, pollution prevention and control and green buildings among others.
      • Equity is allowed only in the sole case of metro projects under the Clean Transportation category.
    • Exceptions
      • Nuclear power generation, landfill projects, alcohol/weapons/tobacco/gaming/palm oil industries and hydropower plants larger than 25 MW have been excluded from the framework. 
    • Targets
      • The government intends to mobilise Rs 16,000 crore from the issuance of green bonds.
    • Features
      • These are rupee-denominated papers and will have a long tenure to suit the requirement of green infrastructure projects.
    • Green Finance Working Committee (GFWC) 
      • The Ministry has constituted a Green Finance Working Committee (GFWC) with representation from relevant Ministries and chaired by Chief Economic Adviser.
      • The committee will meet at least twice a year to support the Ministry of Finance with selection and evaluation of projects. 

    Significance of the move

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    • This approval will further strengthen India’s commitment towards its Nationally Determined Contribution targets, adopted under the Paris Agreement.
    • It will help in attracting global and domestic investments in eligible green projects. 

    Source: IE