Finance Minister approves Sovereign Green Bond framework

The government has excluded nuclear power and large hydropower projects of over 25 MW from the ambit of investments to be made through the issuance of sovereign green bonds, as per the framework approved by Finance Minister Nirmala Sitharaman on Wednesday. 

The Union Budget had announced a plan to issue green bonds as part of the government’s overall market borrowings this year, with the proceeds to be deployed in public sector projects ‘which help in reducing the carbon intensity of the economy.’ 

The framework has been rated ‘Medium Green’, with a “Good” governance score by a Norway-based independent second opinion provider CICERO. The ‘Medium Green’ rating is assigned ‘to projects and solutions that represent significant steps towards the long-term vision, but are not quite there yet’. 

All fossil fuel-related projects have been kept out of the framework, along with biomass-based renewable energy projects that rely on feedstock from ‘protected areas’. 

“By virtue of their indication towards environmental sustainability, green bonds command a relatively lower cost of capital vis-à-vis regular bonds and necessitates credibility and commitments associated with the process of raising bonds,” the Finance ministry said.