While the pandemic changed our world overnight, it also forced us to slow down, evaluate and begin to work towards the kind of world we want to inhabit. Perhaps therefore, even amid COVID-19 induced economic slowdowns all over the world, the concept of sustainability for all factors of production remains one of the few areas with rising financial interest. At a time when, as a species, we are all feeling the ever-increasing effects of climate change, the change in tide and increased sense of responsibility to mitigate the problem serves only to benefit us all. In 2018, India lost an estimated $37 billion due to climate change and extraordinary climate events like the cyclones that devastated the east coast, and, in 2019, 42% of India's land faced drought conditions.1 Therefore, the financial burden of climate change is just as high as it's the human costs it charges and threatens to continue affecting. Thus, this shift in governmental policy and corporate responsibility towards climate change, sustainable development and carbon emission goals, observed the world over, has led to the increased need and emergence of a marketplace centered around climate change and its effects. What started in the 1990's as a small market for carbon credits between the developed and the emerging world, today is turning into a mature market phenomenon.

India, for example, with its ambitious climate change abatement goals, both under its Paris Agreement obligations and its domestic renewable energy policy, has a long way to go before achieving these outlined targets. Under the Paris Agreement, India needs to reduce its carbon footprint, by 33-35% from its 2005 levels of emissions, by 2030. While, its own renewable energy goals stipulates that India shall increase its renewable energy capacity to 175 GW by 2022, along with reducing its fossil fuel dependency by 40%, and building 450 GW of renewable energy capacity, both by 2030. While we are well on the way to achieving these goals, as of August 12, 2021, with an installed capacity of 100 GW of renewable energy power, India is 4th in the world in total installed renewable energy capacity, 5th in solar and 4th in wind capacity, this journey can only be continued with continual policy measures and increased sustainable investment.2

A form of this kind of financing is social impact investing; the merger of responsible capital from investors with the expertise of the public, private and non-profit sectors to achieve a social objective, usually in form of special services and social infrastructure. This is done with the intention of generating social and environmental impact, while delivering financial returns to investors. This sort of investment is typically funnelled into sectors like renewable energy, along with sustainable, and human, development.3 If these instruments are created for the purpose of achieving sustainability targets and development, climate and environmental related projects especially, they are called sustainable bonds. These instruments have been growing in popularity since the second quarter of 2020, and are expected to continue growing this year, with a predicted 59% increase in 2021, amounting to a total of $850 billion raised.4 In India, between January and early May this year, 12 companies in India have issued sustainable bonds and raised $4.96 billion, more than double the $2.33 billion raised by nine companies throughout 2020.5

One important subset, particularly in the Indian context, of sustainable bonds is the importance of investing in social infrastructure. A head under which India plans to address by way of fundraising issues by way of an electronic fund raising platform to be governed by the SEBI. The idea was first publicised by the Finance Minister of India, Nirmala Sitharaman, while presenting the 2019-20 Union Budget. Proposed in her speech was the establishment of a social stock exchange in India, to integrate capital market functions with social welfare goals, enabling increased financial inclusion and growth.6 Under this model, social enterprises would be able to raise capital in the open market through equity and debt instruments, under the watchful eye of the SEBI. A project which, as of September 29, 2021, has been given SEBI approval for the creation and listing of social enterprises engaged in those social activities that have been approved by the regulator under this scheme.7 While this social financial experiment is, of course, in its nascent stages, developments in this area are likely to have far reaching benefits for the 1.3 billion people in the subcontinent.

Another key subset of these sustainable bonds are green bonds: a debt instrument which is raised for the specific purpose of raising funds from investors for the purposes of financing, or refinancing, 'green' projects. This method of financing is reflecting a steady sense of popularity all over the world, especially during these pandemic years. In 2020, a record $222.2 billion was raised globally by green bonds, a 26 percent increase from 2019.8 If the first half of 2021 is any indicator, this trend doesn't seem to be arrested and green bonds are expected to break another record and raise $450 billion this year.9 In India, these instruments are governed by the SEBI Disclosure Requirements for Issuance and Listing of Green Debt Securities, 2017. Under the indicative list outlined under this framework, a 'green' project is typically one where proceeds from the listed security shall be used for projects that aim to harness renewable and sustainable energy, establish more clean transportation, for sustainable water management, and climate change adaptation, to name a few.10 The popularity of these instruments has seen an increase even domestically, with the issuance of 7 green bonds between January and early May 2021. Most importantly, the potential of these instruments has been harnessed, not only by corporations like Jindal Hydro Energy Ltd. and Adani Green Energy Ltd., but also by governmental instrumentalities, to meet its sustainable development goals. Amongst fund issues by State bodies are the green bonds of the Indian Railway Finance Corporation, the Ghaziabad Municipal Corporation, and the Power Finance Corporation.

First, the $500 million IRFC bond was issued in December 2017, the first international green bond issued by the Corporation, received orders amounting to $ 1.6 billion, and found itself oversubscribed by 3 times.11 It was listed on the London Stock Exchange and the BSE's India INX's GSM Green, a platform established exclusively for the international trading of green bonds. The funds raised through the issue were to be put towards "Eligible Green Projects," selected by the Corporation, subject to sector-specific technical criteria, and shall broadly be used for the electrification and upgrading of freight railway lines and passenger transport rolling stock.12 The purpose of this issue was to help facilitate the transition to more sustainable transport by increasing the railways' share in overall land-based freight transportation and electrification thereof, from 36% at the time of issue to 45% in 2030.13 More recently, in April 2021, the Ghaziabad Municipal Corporation listed a Rs. 150 crore green bond on the BSE, thus making history as the first Indian municipal corporation to make use of green bonds. This issue found itself oversubscribed with bids worth over Rs 401 crore, and further receiving an incentive of Rs. 19.5 crore from the Union Government for raising funds through municipal bonds. The proceeds from this bond issue is earmarked for the construction of a tertiary sewage treatment plant. Finally, the ?300 million PFC bond was the first green Euro issue by the Corporation. Listed on September 13, 2021, on both the London and the Singapore Stock Exchange, it experienced strong participation from 82 institutional investor accounts across Europe and Asia, and ended up being oversubscribed 2.65 times.14 The bond was issued to meet the goals of PFC's Corporate Social Responsibility & Sustainability Policy, and the funds so raised are to be disbursed towards selected eligible projects, broadly in the space of renewable energy and energy efficiency.15

Having taken cognizance of the impact climate change has and continues to have, private and State entities using their power to fight the issue together points to an enhanced commitment to sustainable development. However, while we continue the slow march towards achieving our climate change and sustainable development goals, some argue that the rate of change in India is simply not fast enough for the third biggest carbon emitter in the world. Compared to its counterparts, the first and second biggest polluters, the United States and China, India's green bond market has a long way to go. In 2020, the US and China also emerged as the global leaders in cumulative green bond issuance, with the US having raised $211.7 billion in green funds, and China followed with $127.3 billion.16 So, even though India is currently the second largest emerging green bond market, after China, 17 there is a long way to go to match China's level of green bond issuance. One of the reasons cited for the previous level of inaction in India on the green bond front is the tepid reception from one big investor group: retail investors. To attract more participation from this class of investors, the perceived risks surrounding social impact investments must be lower, and with the sudden boom in the domestic sustainable finance market, each subsequent bond issue makes this hurdle a little easier to scale.18 Thus, the growth in issuance of sustainable, around the word and closer home, points to a promising future for climate change mitigation, pushing us towards a more sustainable, green (bonded) future.


1 Sustainable Development and Climate Change, Economic Survey of India 2020-21. Vol. 1, pp 220. Available at https://www.indiabudget.gov.in/economicsurvey/ebook_es2021/index.html#p=592.

2 "India achieves 100 GW Milestone of Installed Renewable Energy Capacity". PIB. August 12, 2021. Available at https://pib.gov.in/PressReleasePage.aspx?PRID=1745254.

3 "What You Need to Know About Impact Investing". Global Impact Investing Network. Available at https://thegiin.org/impact-investing/need-to-know/.

4 "Sustainable Bond Issuance to Reach a Record $850 billion in 2021". Moody's. July 29, 2021. Available at https://www.moodys.com/research/Moodys-Sustainable-bond-issuance-to-reach-a-record-850-billion–PBC_1297595

5 Sarkar, Pooja. "Green Bonds, Sustainable Bonds Demand Picks Up in India in the Pandemic Era". Forbes India. May 25, 2021. Available at https://www.forbesindia.com/article/sustainability-special/green-bonds-sustainable-bonds-demand-picks-up-in-india-in-the-pandemic-era/68141/1.

6 "Union Budget Proposes Creation of a Social Stock Exchange- Under the Regulatory Ambit of Securities and Exchange Board of India (SEBI) for Listing Social Enterprises and Voluntary Organizations". PIB. July 5, 2019. Available at https://pib.gov.in/Pressreleaseshare.aspx?PRID=1577396.

7 Iyengar, Suresh P. "SEBI Lays the Framework for Gold, Social Stock Exchanges". Hindu Business Line. September 29, 2021. Available at https://www.thehindubusinessline.com/markets/stock-markets/sebi-lays-the-framework-for-gold-social-stock-exchanges/article36722921.ece.

8 "Global Capital Markets Answer 2020's Distress Call". Refinitiv. January 21, 2021. Available at https://www.refinitiv.com/perspectives/market-insights/global-capital-markets-answer-2020s-distress-call/.

9 "Sustainable Bond Issuance to Reach a Record $850 billion in 2021". Moody's. July 29, 2021. Available at https://www.moodys.com/research/Moodys-Sustainable-bond-issuance-to-reach-a-record-850-billion–PBC_1297595

10 Circular No.: CIR/IMD/DF/51/2017. SEBI. May 30, 2017. Available at https://www.sebi.gov.in/legal/circulars/may-2017/disclosure-requirements-for-issuance-and-listing-of-green-debt-securities_34988.html.

11 "IRFC's maiden Green Bond Issuance" IRFC. December 6, 2017. Available at https://irfc.nic.in/2017/12/06/irfcs-maiden-green-bond-issuance/

12 "Indian Railway Finance Corporation Ltd. Green Bond Framework" Climate Bonds Initiative. Available at https://www.climatebonds.net/files/files/India%20Rail%20Finance%20Green%20Bond%20

13 Ibid.

14 "PFC issues India's first-ever Euro Green Bond". PIB. September 16, 2021. Available at https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1755380.

15 "Power Finance Corporation Limited Green Bond Framework". PFC India. Available at https://www.pfcindia.com/DocumentRepository/ckfinder/files/Investors/Bonds

16 Jones, Liam "$1 Trillion Mark Reached in Global Cumulative Green Issuance: Climate Bonds Data Intelligence Reports: Latest Figures" Climate Bonds Initiative. December 15, 2020. Available at https://www.climatebonds.net/2020/12/1trillion-mark-reached-global-cumulative-green-issuance-climate-bonds-data-intelligence.

17 Sustainable Development and Climate Change, Economic Survey of India 2020-21. Vol. 1, pp 219. Available at https://www.indiabudget.gov.in/economicsurvey/ebook_es2021/index.html#p=592.

18 Kumar, Neha et al. "Moving from Growth to Development: Financing Green Investment in India". Observer Research Foundation. pp 101. Available at https://www.orfonline.org/wp-content/uploads/2019/02/pg-98-115.pdf.

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