The recent Covid-19 pandemic has made it abundantly clear that global scale disasters without timely mitigation and planning can have a deep and lasting economic and social impact. The Climate Impact Lab estimates that 76% of the world’s population will suffer from higher mortality rates and an additional of 9.1 million people will die each year till 2100 if climate change remains unaddressed. This will be particularly challenging for some countries as the effect of climate change is predicted to be distributed unevenly throughout the world. David Rotman, the editor of MIT TechReview (23 April 2019) has observed that India will bear more than 20% of global social cost of carbon. With no boundaries to the social cost of carbon, the economic future of countries is becoming more interlinked. Assessment, financing and implementation of climate changes targets is needed at the national level so that the impact can be sustained at a global level.

To this end, countries have set national targets in respect of longs terms goals to the Paris agreement such as limitation of greenhouse emissions and global warming at the 21st conference of parties to the 1992 United Nations Framework Convention on Climate Change in 2015. India’s targets outlined under India’s Intended Nationally Determined Contribution (INDC) estimate that India will require at least USD 2.5 trillion (at 2014-15 prices) to implement its climate change goals. As of now India’s climate change actions have been primarily funded through domestic sources (India’s INDC).

Options for financing of green initiatives include green bonds, carbon tax, funding from green institutions such as green banks etc. The first green bond was launched in 2007 by European Investment Bank to raise funds for renewable energy project through structured debt. India’s first green bond was launched by Yes Bank Limited in 2015 to raise INR 5 billion to enhance long-term resources for funding infrastructure projects in renewable and clean energy projects such as wind, solar, biomass and hydropower. These green bonds issued by Yes Bank were listed in India on the BSE (formerly known as the Bombay Stock Exchange) with a tenure of 10 years and coupon rate of 8.85% per annum.

As of February 2020, India had issued an outstanding amount of US$ 16.3 billion in green bonds (Green Finance in India: Progress and Challenges, RBI Bulletin January 2021). While India is relatively new to green bonds, it is the second largest emerging market for green bonds. However, India does not have any dedicated law governing issuance of green bonds. The Securities and Exchange Board of India (SEBI), the Indian securities market regulator, has discussed aspects of green bonds in a memorandum and subsequently in 2017 issued a circular (SEBI Circular) on disclosure requirements to be followed for green bonds listed on Indian stock exchanges. General provisions related to issuance of bonds by Indian companies are detailed under Companies Act, 2013. In addition, the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 which governs bond issuances on Indian stock exchanges also applies to green bonds issued by Indian companies if such bonds are proposed to be listed on Indian stock exchanges. Overall, Indian law regulates bonds with the objective of protecting subscribers through mandatory provision of trustee for certain bond issuances, security coverage for listed bonds and maintenance of minimum reserves for repayment of bonds.

Prior to the SEBI Circular, issuers such as Yes Bank Limited relied on global standards to classify their bonds as green bonds. Yes Bank’s green bond which was listed on the BSE in 2015 was classified as a green bond on the basis of the Green Bond Principles, 2014, which is a voluntary process guideline for issuance of green bonds. The SEBI Circular has defined green bonds as those bonds where funds have been earmarked for green projects. SEBI recognizes the following sectors eligible as green projects (i) renewable and sustainable energy (wind, solar etc.), (ii) clean transportation (mass transportation), (iii) sustainable water management (clean and/or drinking water, water recycling etc.), (iv) climate change adaptation, (v) energy efficiency (efficient and green buildings), (v) sustainable waste management (recycling, waste to energy etc.), (vi) sustainable land use (including sustainable forestry and agriculture, afforestation etc.) and (vii) biodiversity conservation. Following the SEBI Circular, Indian issuers may rely on the above classification to categorize their bonds as green bonds. For instance, bonds issued by the Ghaziabad Nagar Nigam in 2021 are green bonds under SEBI’s classification as the proceeds of the bond was required to be utilized towards financing a tertiary treatment plan at Indirapuram to generate industrial grade water.

Indian law does not mandate any pre-issuance review process for review of project evaluation and selection criteria for projects eligible for green bond financing. As Indian green bond market is at a nascent stage, the option to appoint an independent reviewer has been left to the discretion of the issuer as long as details of such appointment are disclosed in the offer document. Further, if an issuer follows internationally accepted standards to measure impact assessment, to identify projects, to utilize project proceeds then the issuer is required to disclose the adopted standards in the offer documents and on a continuous basis. This disclosure requirement helps to prevent green washing. Some Indian issuers have voluntarily used independent services providers to provide assurance services on the use of proceeds in line with green bond principles.

As the green bond market is dependent upon investor perception of impact, SEBI has set out the criteria for issuers to promote bonds as green bonds. Issuers are required to provide minimum disclosures in the bond offer documents and on a continuous basis. The bond offer documents should contain a statement on environmental objective of the issuance, detail the process to determine eligibility of projects or assets as green project or assets, detail the green projects and assets (including any refinancing of existing green projects) and detail systems used for tracking use of issuance proceeds.

Other than the above, SEBI requires issuers of green bonds to provide details of utilization of proceeds verified by external auditor along with the half yearly and annual financial results. The annual report of the issuer must provide details on projects and assets to which the proceeds of the green bond have been allocated and performance indicators to ascertain the environmental impact. If the issuer is unable to provide quantitative performance indicators, then the issuer should explain the reasons for inability to do so in its annual return. These checks and balances help ensure that the proceeds of the green bonds are being utilized appropriately for green projects. Measuring impact of impact investment through ascertainable techniques and quantifying such impact has been one of the key challenges of impact investment. Mandatory disclosure of qualitative performance indications ensures that issuers are obligated to provide at least the minimum information to investors to assess whether their funds are resulting in the desired impact. As the green bond market grows, SEBI may consider revising the disclosure norms for green bonds and making disclosure of performance indicators mandatory for green projects and penalizing bond issuers for failure to make adequate disclosures.

Indian issuers have also listed green bonds and raised capital through the foreign bond market through USD denominated bonds. JSW Hydro Energy Ltd (a subsidiary of JSW Energy Limited) in 2021 raised USD 707 million through the international bond market for repayment of debt in existing hydro-energy projects. Indian issuers have also listed green bonds on BSE’s India International Exchange (India INX) at the International Financial Services Centre (IFSC) of the Gujarat International Finance Tech City (GIFT City). Currently, Indian issuers have raised USD 5.42 billion through nine green bonds listed on the India INX with interest rates of 3.835%, 4.5% and 6.25%.  

Details of recent key green bonds issued by Indian companies





Interest Rate (p.a.)




Stock Exchange



Ghaziabad Nagar Nigam (2021)

INR 1.5 billion


10 years


Sustainable water management

Yarrow Infrastructure Pvt. Ltd. (2021)

INR 5.81 billion


3 years


Solar energy

JSW Hydro Energy Ltd. (2021)

USD 707 million


10 years

Singapore Exchange

Hydro-energy projects

ReNew Wind Energy Delhi Pvt. Ltd. (along with nine group companies) (2021)

USD 585 million


7 years

India INX

Wind and solar energy generating assets

State Bank of India (2019)

650 million


5 years

India INX

Renewable energy, low carbon buildings, waste and pollution control transactions, sustainable transportation and industry and energy-intensive commercial transactions

Adani Green Energy UP Ltd., Adani Green Energy (UP) Limited, Parampujya Solar Energy Pvt.

500 million


5 Years

Singapore Exchange and India INX

Solar projects


Green bonds issued by Indian issuers in the overseas bond marker have been issued in accordance with globally accepted green bond framework. For instance, the ReNew Power green bond (2021) listed on India INX has been certified under the Climate Bond Initiative. Bonds raised by Indian companies from global markets are considered as debt or external commercial borrowing. Such overseas bonds are required to comply with the Foreign Exchange Management Act, 1999 and in particular Master Directions on External Commercial Borrowings, Trade Credits and Secured Obligations dated March 26, 2019 and Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (ECB Regulations). The ECB Regulations govern certain aspects of the bonds such as minimum maturity period, ceiling on all-in cost of borrowing, default rate, parking of proceeds for issuance of bonds by Indian issuers, reporting of use of proceeds, reporting of interest payment and redemption of bonds.

One of the challenges to issuance of green bonds in India is the high cost of issuance of green bonds.  The cost of issuance of green bonds is generally higher than other corporate bonds or government bonds and green bonds are typically issued by public corporations or private sector companies with better financial health (Green Finance in India: Progress and Challenges, RBI Bulletin January 2021). Even with respect to green bonds listed on India INX, it appears that the cost of issuance is lower for public sector companies. Indian Railway Finance Corporation Limited and State Bank of India were able to issue green bonds on India INX at coupon rates of only 3.85% and 4.50%. Whereas private sector companies (Adani Green Energy and ReNew Power group) which have issued green bonds on India INX have issued the green bonds through multiple group companies at a coupon rate of 6.5%. If the cost of issuance continues to remain high, small and medium size private sector companies will not be able to capitalize green projects through the bond market. Financing through green bonds continues to remain focused on mature infrastructure sectors such as energy and is yet to make a concrete impact in unconventional sectors such as reafforestation, climate change technologies etc. Unconventional sectors will still have to rely on financing through banks, grants and corporate social responsibility initiatives. Therefore, there is immense scope for Indian regulators to implement strategies to provide private companies access larger capital resources for funding climate change initiatives.

As per the annual report of BSE for FY 2019-20, the total amount mobilized through green bonds at BSE in was INR 18.03 billion FY 2019-20 and INR 8.65 billion in FY 2018-19. In only one year, there has been a significant jump in green finance through green bonds from the domestic market. As the market steers towards rewarding companies invested in conducting business through ESG principles, it will be interesting to note how policy makers address issues such as green washing, lack of investor confidence, funding of unconventional green projects and reduction in cost of green bonds so that green finance through green bonds is viable for lesser established companies. Some emerging green sectors which could significantly benefit through issuance of green bonds are public transportation in particular electric vehicles and solar energy. Policy makers may consider providing benefits to companies in these emerging sectors to raise funds in the global and domestic bonds markets to accelerate the growth of these markets. This will help sectors other than core energy projects to gain momentum through green finance and propel India closer towards its INDC goals.


For further information, please contact:  

Souvik Ganguly, Partner, Acuity Law

[email protected]