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What is Green Bond and its benefit

 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