Greenium

The Chief Economic Advisor recently stated that private investors need to prioritize sustainable investments citing the low “greenium” from them on India’s sovereign green bond offering.

Status of Greenium in India:

• Greenium refers to the premium that the issuer receives on green bond issuances wherein investors are willing to accept lower yields on such debt instruments.
• This is due to the sustainable nature of the projects financed by their proceeds.
• Despite securing a good rating on its green bond framework, Indian sovereign green bonds have hardly received any ‘greenium’ from private investors.
• It is more a ‘wall of capital’ than a ‘flood of capital’ that is waiting to fund energy transition in Emerging Markets and Developing Economies (EMDEs).
• India’s ‘Framework for Sovereign Green Bonds’, released in 2022, was rated as ‘Medium Green’ with a ‘Good’ governance score.
• Sovereign Green Bonds are are expected to help the Indian government tap finances from potential investors for deployment in public sector projects with sustainable goals.
• In 2022-23, the Centre raised Rs 16,000 crore through Sovereign Green Bonds, and Rs 923 crore was incurred from the general revenues of the government.
• In FY24, the greenium had declined to around 2 bps for certain green bond issuances.

Ref: Source

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