In a significant move towards environmental sustainability, the government has announced its intention to issue Sovereign Green Bonds (SGrBs) worth Rs 20,000 crore as part of its broader borrowing programme for the second half of fiscal year 2023-24. The announcement, made by Ajay Seth, Secretary of the Department of Economic Affairs (DEA), on Tuesday, September 26, builds upon the positive market response observed in the previous year when the government first ventured into the realm of green bonds.
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The initial tranche of green bonds for this fiscal year is set to hit the market between November 6-10, with an offering of Rs 5,000 crore. Subsequently, three more tranches of equal amounts, each with different maturities, will follow.
The issuance calendar is as under:
| Auction week | Amount | Security-wise allocation |
| November 06-10, 2023 | Rs 39,000 crore | 5 Years SGrB for Rs 5,000 crore |
| December 04-08, 2023 | Rs 39,000 crore | 10 Years SGrB for Rs 5,000 crore |
| January 15-19, 2024 | Rs 35,000 crore | 30 Years SGrB for Rs 5,000 crore |
| January 29 - February 02, 2024 | Rs 39,000 crore | 30 Years SGrB for Rs 5,000 crore |
(Source: RBI)
Understanding Sovereign Green Bonds
Sovereign Green Bonds are financial instruments issued by sovereign entities, inter-governmental groups, alliances, or corporations. The distinctive feature of these bonds is that the proceeds from their sale are earmarked exclusively for projects classified as environmentally sustainable. These projects focus on climate-resilient initiatives that address critical environmental challenges.
Benefits of investing in Sovereign Green Bonds
By investing in green bonds, individuals can actively support environmentally-conscious projects and influence the sustainable practices of bond issuers. Additionally, green bonds provide a means to hedge against climate change risks. As the world grapples with the consequences of environmental shifts, investing in climate-resilient projects becomes paramount.
Typically issued with longer maturities, sovereign green bonds offer stability and long-term returns. They are considered relatively safe investments due to government backing. This factor can provide retail investors with reduced market volatility, contributing to a more secure investment environment.
How to invest in green bonds?
Retail investors interested in green bonds can access them through the Reserve Bank of India (RBI) retail direct website or through their brokerage accounts, provided it's made available by their brokerage.
Who should invest in these bonds?
Those looking for an alternate source of income will find green bonds appealing, as they offer an opportunity for regular returns. Investors who are passionate about environmental conservation and wish to contribute to sustainable projects can also find green bonds aligning with their values.
These bonds provide tax-exempt income, making them an attractive option for those looking to optimise their tax position. Higher demand for green bonds can translate into lower borrowing costs for businesses, which can result in cost savings being passed on to investors in the form of dividends or lower expenses, experts say.
It's, however, important to note that, unlike some other financial instruments, sovereign green bonds do not offer specific tax benefits, as in under Section 80C or 80D.
(Edited by : Shoma Bhattacharjee)
First Published: Sept 27, 2023 5:37 PM IST
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