What are Green Bonds ?

Definition: 

  • These are the Bonds basically debt instruments which help issuer to get capital while the investors receive fixed income in the form of interest. 
  • When the bond matures, the money is repaid.
  • The issuer of a green bond publicly states that capital is being raised to fund ‘green’ projects, which typically include those relating to renewable energy, emission reductions and so on. There is no standard definition of green bonds as of now.
  • Indian firms like Indian Renewable Energy Development Agency Ltd and Greenko have in the past issued bonds that have been used for financing renewable energy, however, without the tag of green bonds.
  • Green bonds are issued by multilateral agencies such as the World Bank, corporations, government agencies and municipalities.
  • Institutional investors and pension funds also have appetite for such bonds. For instance, investment funds Black Rock and PIMCO have specific mandates from their investors to invest only in bonds which fund green projects.
  • The issuer provides periodic reports about the project.
  • In case of Green Bonds, the issuer gets capital from the investors only if the investment (capital) is being raised to fund green projects relating to renewable energy or emission reductions etc.