The first green Indian rupee bond to hit the markets outside of India has been issued in London as a measure to raise money for renewable energy and energy efficiency projects.
The £31 million bond is part of a larger £1.9 billion program backed by the International Finance Corporation, part of the World Bank, as a measure to raise private money to back eco-friendly developments in India.
The money raised in London will go to India’s Yes Bank for distribution to projects in the country.
The IPC explained releasing the bond in London aids global investment in rupee denominated debt held outside India.
“Dealing with climate change is one of our priorities,” said IFC vice president Jingdong Hua. “The successful funding of this bond shows how important markets outside India are in raising money to tackle climate change issues.”
Rupee bonds
Green bonds are designed to raise money specifically for energy efficiency related projects.
Brazil and China have also recently issued green bonds
Harriett Baldwin, economic secretary to the Treasury, explained basing the bond in London showed the strength of the UK’s green bond market.
“London is proving to be a natural partner for the offshore rupee bond market due to the strength and expertise of our market as a world leader,” she said.
“This is good for the UK economy and shows the high regard our international trading partners have for the City.”
The green rupee bond is the latest in a series of rupee bonds issued in London. Investment so far adds up to £1.9 billion.
Growing importance
Green bonds are becoming important sources of finance for impact investors who want their money to make a difference rather than go to traditional government or corporate bonds.
More than £14 billion has been raised globally for green projects in 2015, and although this is a small blip compared to the world £56 trillion bond market, investment has increased rapidly since the first bond was issued in 2007.
Green bonds fund a multitude of projects from the public transport system in Seattle in the USA to banks of solar panels and offshore wind farms.
Many green bonds offer a better spread than treasury bonds – Solar City, a US firm involved in solar power projects offers a 5.75% yield compared with the US Treasury’s 10 year note yielding around 2%.
Green bonds are generally issued by government-backed agencies such as the World Bank and the European Investment Bank.
