Green Bonds – The Greener Way of Financing
UNDERSTANDING GREEN BONDS AND GREENER WAY OF FINANCING Yes Bank and Export-Import Bank of India (Exim Bank) recently tasted success launching what are called ‘Green Bonds’- a relatively new way to finance renewable energy projects. What are green bonds? A bond is a debt instrument with which an entity raises money from investors. The bond issuer gets capital while the investors receive fixed income in the form of interest. When the bond matures, the money is repaid. A green bond is very similar. The only difference is that 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 b...