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About Sovereign Green Bonds (SGrBs):
- SGrBs are a kind of government debt that specifically funds projects attempting to accelerate India’s transition to a low-carbon economy.
- The RBI lacked a system to evaluate investments’ environmental and emissions credentials to prevent greenwashing, where projects falsely claim green status for funding.
- It is the act of making false or misleading statements about the environmental benefits of a product or practice.
- Introduced in 2022: To fill this gap, the Finance Ministry unveiled India’s first SGrB Framework outlining eligible projects for funding through these green government securities.
Importance of FII Investment in Green Projects:
- Allowing FIIs to invest in India’s green projects expands the available capital for the country to achieve its ambitious 2070 net zero goals.
- This supports the target of having 50% of India’s energy sourced from non-fossil fuel-based options and reducing the carbon intensity of the economy by 45%, as pledged by Prime Minister Narendra Modi at COP26 in Glasgow 2021.
Benefits of FII Participation in Green Bonds:
- Green G-Secs offer lower interest rates compared to traditional G-Secs.
- Globally, central banks and governments are encouraging financial institutions to adopt green investments for a sustainable future.
- FIIs seek to diversify their green investments and leverage regulatory support.
Why in the news?
Reserve Bank of India (RBI) green lighted investments in the country’s Sovereign Green Bonds (SGrBs) by Foreign Institutional Investors (FIIS).
