Sovereign Green Bonds (SGrBs) were introduced as a key initiative to finance environmentally sustainable projects in India. However, recent trends indicate limited investor interest due to lower yields. Despite this, SGrBs remain a crucial financial instrument in achieving India's climate commitments and fostering a green economy.
What are Sovereign Green Bonds?
Announced in Union Budget 2022-23, SGrBs aim to reduce carbon intensity in India’s economy.
These are debt instruments issued by the Government of India to raise funds for environmentally sustainable projects.
The funds raised are earmarked for green projects, ensuring that the investment directly supports climate and environmental goals.
What Qualifies as a Green Project?
Green projects funded by SGrBs include initiatives that:
Enhance energy efficiency in resource utilization.
Reduce carbon emissions and promote clean energy adoption.
Improve climate resilience through sustainable infrastructure.
Protect and restore ecosystems and biodiversity.
Significance of Sovereign Green Bonds
Supports India’s Climate Goals
Helps achieve India’s Nationally Determined Contributions (NDCs) under the Paris Agreement.
Aids in the transition to a low-carbon economy.
Constitutional and Legal Mandate
Aligns with Article 48-A of the Constitution, which mandates the state to protect and improve the environment.
Mobilizing Green Finance
Attracts investment in renewable energy, sustainable agriculture, and water conservation projects.
Global Recognition
Strengthens India’s position in the global sustainable finance market.
Challenges and Way Forward
Limited Investor Interest: Investors seek higher returns, making SGrBs less attractive.
Need for Policy Support: Government incentives, tax benefits, and regulatory frameworks can improve uptake.
Enhancing Market Confidence: Transparent reporting and impact assessments can build trust among investors.
UPSC Prelims Question
Q: Consider the following statements regarding Sovereign Green Bonds (SGrBs):
They were introduced in the Union Budget 2022-23 to finance environmentally friendly projects.
Funds raised through SGrBs can be used for any government expenditure, including infrastructure and social welfare schemes.
These bonds help India achieve its Nationally Determined Contributions (NDCs) under the Paris Agreement.
Which of the above statements is/are correct?
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2, and 3
UPSC Mains Question
Q: Sovereign Green Bonds are a crucial instrument for financing India's climate commitments. Discuss the challenges and opportunities associated with their implementation.
(GS Paper 3 – Indian Economy, Environment & Sustainable Development)
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