Green Bonds: Boosting Sustainable Construction and Green Buildings
Green Construction Industry in India has a huge scope when we consider the trend of smart cities projects and rapid rate of urbanization. Several regulatory bodies have already begun considering offering benefits for Sustainable Development. Various Institutions such as State Governments, Metropolitan Development Authorities and Municipal Corporations have offered both property tax benefits and additional building construction space for green constructions with mandatory energy conservation and developed green building codes.
To facilitate Green Construction Projects and cater to the growing demands, many Financial Institutions have now started taking active part in the green building movement through exploring means to raise funds. The future is promising for Green Bond market in India, if supplemented with tax benefits, interest subsidies and capital relief to the issuers as well as investors. As the green bonds market continues to develop, more numbers of issuers and investors are expected to join the bandwagon.
In a more recent happening, PNB Housing Finance has raised Rs. 500 crore by issuing bonds to International Finance Corporation (IFC), a member of the World Bank Group for funding its green residential projects. It has also pre-approved more than 62 green projects across Delhi-NCR, Mumbai, Pune and Bengaluru among others. The funds will be used to finance green residential projects which are certified by recognized Green Building Certification standards.
Earlier, YES Bank issued the first-ever green infra bonds in February 2015 and raised Rs. 315 crore. In March 2015, Exim Bank raised Rs 3,330 crore via green bond sale followed by IDBI raising Rs 2,331 crore through green bonds. Securities and Exchange Board of India (SEBI), a regulator for the securities and financial market in India, has issued final guidelines on the issuance of green bonds and listing of green bonds at stock exchanges. SEBI has also laid down the protocols in line with the requirements as provided in Green Bond Principles as recommended by International Capital Market Association.
Recently, Axis bank has also listed its "green bond" on the London Stock Exchange.
SO WHAT ARE GREEN BONDS
“Green Bonds are standard bonds with ‘green’ as a bonus feature. Issued to raise capital to exclusively fund sustainable projects, assets or business activities with an environmental benefit, these are known to offer better returns.”
Green Bonds have been gaining investor’s interest due to governments and institutions initiatives in the field of ‘environment conservation’ and ‘sustainable development’.Green Bonds are one of the many debt instruments which give the issuers an access to a wide pool of investors as compared to regular bonds or other asset classes.
The Green Bonds will be majorly used to develop Green Buildings and improve performance based on various energy and environmental design standards/certification. The pool of funds will also be channelized to finance clean/renewable energy projects, as stated by the investors.
SO, HOW THE WORLD CAN BE MADE A BETTER PLACE
Yes Green Bonds can truly make the world a better place [unless they are not converted into complex derivatives :) ...! ]
- Green Bonds can give a strong boost to theGreen Lending Practice (which is still at a nascent stage), thereby supporting investments in green energy efficient buildings.
- Green Bonds can support investments in sustainable development projects, thus, establishing a market and an ecosystem for green construction in India.
- They can generate significant environmental and economic benefits through development of energy efficient housing construction projects,which will further help in reducing greenhouse emissions and pollution, by reducing 1500 MT of green house gases emissions per annum.
Sustainability Consulting for Built-Environment
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