Context
India’s Sovereign Green Bonds (SGrBs) are witnessing strong investor demand, allowing them to trade at a persistent “greenium” over comparable conventional government securities. The demand, particularly from insurance companies, indicates growing appetite for green financial instruments.
Explanation
- Green Bonds are debt instruments whose proceeds finance environmentally sustainable projects such as renewable energy, clean transport and climate-resilient infrastructure.
- Sovereign Green Bonds (SGrBs) are issued by the Government of India, with the RBI conducting their auctions as part of government borrowing.
- India introduced SGrBs in 2022-23 under its Sovereign Green Bond Framework.
- Greenium refers to the lower yield investors accept on green bonds compared with similar conventional bonds, reflecting willingness to pay a premium for green assets.
- Bond prices and yields move inversely; stronger demand raises bond prices and lowers yields.
- Basis point (bps) is one-hundredth of a percentage point; 100 bps = 1%.
- SGrBs support climate finance, sustainable infrastructure and India’s environmental commitments.
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