Introduction
A green bond is a debt instrument issued by an entity like any other bond (with subtle differences) to raise funds from investors- Green bonds are focused to Environment, Social and Governance (ESG) projects
- There is the double scope of environment benefit and development in green bonds
Difference between Regular bond and Green bond
- Green bond is issued to finance only green projects
- Green bond issuer explicitly states that the fund raised will be used for environmental benefit activities like renewable energy, solar projects etc
- Green bonds are being used based on market practices
- Issuer can price Green bonds at a far better rate than the regular bonds due to the environmental benefit feature
Benefits of Green bonds
- Green bonds help to increase the reputation of the issuer
- Issuer will get positive publicity
- Green bonds develop a commitment among the corporate about sustainability and development of the environment
- Green bonds will give an international experience
- Positive public relations will be enhanced
- New set of investors will come in to the fray with the introduction of green bonds
- Issuer can get access to a diversified set of investors other than business oriented clients or investors
- Issuer will get a pricing advantage in case of green bonds
- The current scenario of global warming and climate change will attract global investors to invest in green bonds in large numbers
- The cost of funding for the green projects will be lowered with the expected increasing number of investors in the green bonds
Conclusion
- World nations are responding in a positive manner to the climate change scenario with the signing of the Conference of Parties (COP) in Rio by majority of the nations
- special emphasis on renewable energy projects especially on solar power generation making it conducive for green projects
- The reception of green bonds is on the positive side
- Overall, Green projects and green bonds offer huge opportunities in future for corporate for the overall development of the nation and the world as a whole