Why has India allowed FIIs to invest in its green bonds?

Syllabus: GS-III, Subject: Environment, Ecology and Disaster Management, Topic: Global Agreements and Efforts, Issue: Green finance

Context: RBI has allowed Foreign Institutional Investor (FII) to invest in Sovereign Green Bonds (SGrBs)

Sovereign Green Bonds (SGrBs):

  • Government debt aimed at funding India’s transition to a low-carbon economy.
  • Offer lower interest rates compared to conventional G-Secs, known as a greenium.
  • Adoption of greenium is encouraged by financial institutions to accelerate the transition to a greener future.

Measures to facilitate SGrBs

  • The 2022-23 Union Budget introduced SGrBs to finance projects such as offshore wind, solar power, and EV transition.
  • Concerns about greenwashing led to the release of India’s first SGrB Framework by the Finance Ministry in November 2022.
  • The framework lists eligible projects like renewable energy investments, energy-efficient buildings, public transport, and EV subsidies.


  • Supports funding for ambitious net-zero goals pledged by Prime Minister.
  • Diversify green investments and gain green credentials.
  • Addresses greenwashing concerns, makes green investments in India attractive.
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