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  • Writer's pictureGeneral Carbon


What is a Green Bond?

A green bond is a fixed-income financial instrument for raising capital through the debt market. The green bond raises funds for projects having environmental benefits based on what we define as ‘green’.  Green bonds are usually sourced from pension funds, sovereign wealth funds and insurance companies. Green bonds are issued to serve three main objectives in the current market scenario which presents as a barrier to climate mitigation and adaptation activities:

  1. Reduce the cost of capital further

  2. Stimulate demand from institutional and retail investors

  3. Expand and diversify the issuers base.

Types of Green Bond and Applicability Condition Set by Climate Bond Standard

Climate Bonds Standard sets out the requirements that apply to specific types of bonds. Definitions for the Bond Types are provided in the Definitions section of the Climate Bonds Standard. The table below specifies which Requirements are applicable to each Bond Type. The applicable Requirements differ between Bond Types, and address specific risks related to each Bond Type.Bond TypesApplicable RequirementsUse of Proceeds Bond·         Project Holding

·         Settlement Period

·         EarmarkingUse of Proceeds Revenue Bond·         Project Holding

·         Settlement Period

·         EarmarkingProject BondSecuritized Bond·         Project Holding

·         EarmarkingOther Debt Instrument·         Project Holding

·         Settlement Period

·         Earmarking

History of Green Bond in India

India is one of popular markets when it comes to issuance of Green Bonds. It featured in the 7th position in terms of issuances in 2016 with issuance of USD 2.7 billion, behind United States, France, China, Germany, Netherlands and Sweden. The history of green bond market in India is well briefed in the figure below.


Axis Bank issued India’s 1st Certified Green bond on London Stock Exchange-The Certification was done by Climate Bond Standard

Defining ‘Green’

The Securities and Exchange Board of India (SEBI) on 30th May, 2017 came out with a circular stating which is the project activities, for which a Debt Security will be called ‘Green’ or ‘Green Bond Security’. The activities are aligned to the Green Bond Principle. The following are the broad categories:-


L&T Infrastructure Finance became the 1st SEBI approved green bond-IFC invests in L&T Infrastructure Finance

Before the development of guidelines by SEBI Internationally recognized Climate Bond Standards lists down a two-step process to determine the eligibility of specific projects as contributors to ‘low carbon’ and climate resilient economy which is well defined in CBS Version 2.1 under clause 9 and clause 10 of the report.

But does the terminology ‘green’ vary?

Yes, the term green will vary with geography and with the functionality of the project activity. All projects that are under ‘green’ may not exhibit the properties of ‘green’ if end effects of such project are detrimental to the society. The Standards stated by SEBI provide for an elaborate list of sectors which would qualify to be eligible projects for Climate Bonds issuances and they are as follows:EnergyLow Carbon BuildingsIndustry & Energy Intensive CommercialWaste & Pollution Control•          Solar

•          Wind

•          Geothermal

•          Hydropower

•          Bioenergy

•          Wave and Tidal

•          Energy distribution & management

•          Dedicated transmission•          Residential

•          Commercial

•          Retrofit

•          Products for building low carbon buildings•          Manufacturing

•          Energy efficiency processes

•          Energy efficiency products

•          Retail and wholesale

•          Data centers

•          Process & fugitive emissions

•          Energy efficient appliances

•          Combined heat & power•          Recycling facilities

•          Recycled products & circular economy

•          Waste to energy

•          Methane management


Information Technology & CommunicationsNature Based AssetsWater•          Rail

•          Vehicles

•          Mass transit

•          Bus rapid transport

•          Water-bourne transport

•          Alternative fuel infrastructure•          Power management

•          Broadband

•          Resource efficiency

Teleconferencing•          Agriculture land

•          Forests (managed and unmanaged)

•          Wetlands

•          Degraded land

•          Other land uses (managed and unmanaged)

•          Fisheries and aquaculture

•          Coastal infrastructure•          Flood defenses

•          Water distribution infrastructure

•          Water capture & storage infrastructure

•          Water treatment plants

•          Assets in energy & production industries

Process of Issuance of Green Bonds

Issuance of Green Bonds in India will follow the existing SEBI regulations for issuance of corporate bonds as prescribed under ILDS Regulations. However, for describing a corporate bond as green bond, in addition to the compliance required under ILDS Regulations, the Green Bond Principles, 2015 will also have to be disclosed:

SEBI Disclosure Requirements

Over and above the SEBI guidelines the issuer will have to disclose the following points based on Green Bond Principles

  1. Use of proceeds: issuers to define and disclose their criteria for what is considered ‘green’ i.e. which projects, assets or activities will be considered ‘eligible’ and how much funds will be spent on.

  2. Project evaluation and selection: what process will be used to apply ‘green’ criteria to select specific projects or activities?

  3. Management of proceeds: what processes and controls are in place to ensure funds are used only for the specified ‘green’ projects?

  4. Reporting: how projects will be evaluated and progress reported, against both environmental and financing criteria.

Alternatively one can get green bonds internationally certified and get it subscribed by international agencies who can list it under foreign stock exchanges. The procedure to achieve such certification is through Climate Bond Standards.

The Climate Bonds Standard & Certification Scheme aims to provide the green bond market with the trust and assurance that it needs to achieve scale. Activating the mainstream debt capital markets to finance and refinance climate-aligned projects and assets is critical to achieving international climate goals, and robust labelling of green bonds is a key requirement for that mainstream participation.

The Climate Bonds Standard sets out clear criteria to verify certain green credentials of a bond or other debt instrument.


India has stated its’ INDC that suggests a requirement of atleast USD 2.5 trillion to finance climate change activities. Introduction of tax free infrastructure bonds amounting to INR 50 billion will help meet a target of 175 GW of renewable energy by 2022 which requires a funding of USD 200 billion. To make green bonds a success the guidelines stated by SEBI and CBS should be integrated to ensure project costs do not supersede the budgeted amount.

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