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What are sovereign green bonds, and why are they significant? (200 Words, 15)
Green bonds are borrowings or securities that are floated by companies or government to fund and finance government debt. Green bonds are different from conventional bonds because money raised by issuing these instruments will be used extensively for financing projects that have a net positive contribution to the environment.
Green bonds significance
- Finance green projects
Green energy projects or infrastructure can be financed by floating green bonds. They are suitable for green energy specific projects.
- Individual contribution to green planet
An individual can be party to save planet by buying a green bond. They will be able to earn interest and also contribute to green planet.
- Higher returns
Compared to conventional bonds, green bonds are designed to carry higher returns. This is because their scope is limited and difficult to attract buyers.
Use of green bonds for India’s net zero goals
- Renewable energy infrastructure
Indian government and private companies building infrastructure to negate carbon sequestration will need money. This can be feasible through green bonds.
- Reduce carbon footprint
Currently, there are not enough power plants to produce renewable energy. If financing is obtained, such infrastructure can soon be feasible.
- Finance from abroad
Many environment adhering entities are looking for climate friendly projects for investing. Green bonds will ensure that foreign entities can participate in green energy projects.
Thus, green bonds have the potential to become a means for raising revenue to carry out environment friendly projects.
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