On 9th Nov 2022, Wednesday, the Minister of Finance, Nirmala Sitharaman, gave her approval to the definitive framework for sovereign green bonds, which will be used to support environmentally beneficial projects.

Green Bonds In Short

Green bonds are financial products that produce revenue for investments in projects that are environmentally friendly and climate-appropriate. Additionally, green bonds have a lower cost of capital than traditional bonds.

Benefits Of The Approval

According to the Ministry of Finance, the approval that was given on Wednesday will strengthen India's commitment towards its Nationally Determined Contribution (NDCs) targets, which were adopted under the Paris Agreement. It will also help in attracting global and domestic investments in projects that are eligible to be environmentally friendly.

Bonds of this kind will be issued, and the proceeds will be invested in projects carried out by the public sector that lead to a cutback in the quantity of carbon dioxide emissions produced by the economy.

Similarity Of The Framework And Panchamrit

The framework is similar to the commitments India made under "Panchamrit," which Prime Minister Narendra Modi explained at COP26 in Glasgow, Scotland, in November 2021.

The Union Finance Minister said in the Union Budget FY 2022-23 that Sovereign Green Bonds would be issued to raise money for green projects. This approval makes that happen.

CICERO, an independent and well-known organization around the world, was asked to evaluate India's green bonds framework and make sure it was in line with ICMA's Green Bond Principles and international best practices.

This organization has assessed India's Green Bonds Framework as "Medium Green" with a "Good" governance rating, according to the government.

Idea Behind Panchamrit

When addressing the COP26 Summit in Glasgow in November 2021, Prime Minister Narendra Modi offered Panchamrit, which is comprised of five components, as a solution to the problem of climate change.

"First, India's capacity to generate electricity from sources other than fossil fuels will reach 500 gigawatts by the year 2030. Second, by the year 2030, India will satisfy fifty percent of its need for energy through the use of renewable sources. Third, beginning immediately and continuing through 2030, India will bring the overall amount of expected carbon emissions down by one billion tonnes. A less than 45 percent reduction in the carbon intensity of India's economy is expected to be achieved by the year 2030. And fifth, the goal of achieving Net Zero will be accomplished in India by the year 2070 "he had remarked.

Reference used: https://timesofindia.indiatimes.com/business/india-business/govt-unveils-sovereign-green-bonds-framework/articleshow/95414839.cms

Cover image reference: https://img.freepik.com/free-vector/business-ethics-illustration_23-2148729793.jpg