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India’s Debut Green Bond Framework Excludes Big Hydro

The green bonds will be used to pay for infrastructure and meet clean energy goals in Asia’s third-largest economy.

BENGALURU, INDIA - OCTOBER 09: A balloon vine (Cardiospermum halicacabum) grows in between photovoltaic cell solar panels in the Pavagada Solar Park on October 9, 2021 in Thirumani village, Karnataka, India. As the countdown to the United Nations Climate Change Conference (COP26) at Glasgow begins, India is in a formidable position to lead climate change conversations as the country is on its way to meet its renewable energy target of 175GW by 2022, with solar power alone contributing to 100GW. In a clutch of villages around the Pavagada solar park in the southern state of Karnataka where nearly 13,000 acres of land has been acquired on lease for 28 years to produce 2050MW of electricity, economic inequity is becoming apparent — while farmers with large land holdings have clearly benefitted, poor farmers with no land have further been pushed to the margins with rising unemployment, lack of basic infrastructure, and a loss of their cultural identity. (Photo by Abhishek Chinnappa/Getty Images)
BENGALURU, INDIA - OCTOBER 09: A balloon vine (Cardiospermum halicacabum) grows in between photovoltaic cell solar panels in the Pavagada Solar Park on October 9, 2021 in Thirumani village, Karnataka, India. As the countdown to the United Nations Climate Change Conference (COP26) at Glasgow begins, India is in a formidable position to lead climate change conversations as the country is on its way to meet its renewable energy target of 175GW by 2022, with solar power alone contributing to 100GW. In a clutch of villages around the Pavagada solar park in the southern state of Karnataka where nearly 13,000 acres of land has been acquired on lease for 28 years to produce 2050MW of electricity, economic inequity is becoming apparent — while farmers with large land holdings have clearly benefitted, poor farmers with no land have further been pushed to the margins with rising unemployment, lack of basic infrastructure, and a loss of their cultural identity. (Photo by Abhishek Chinnappa/Getty Images)

India plans to issue sovereign green bonds for renewables, clean transportation, and water and waste management projects, according to the framework released Wednesday.

The government excluded hydropower plants larger than 25MW, the framework said, along with categories including nuclear power generation and projects involving fossil fuels. For a long time, India didn’t include large hydropower projects among renewables, given the environmental risks.

The green bonds will be used to fund infrastructure and meet clean energy goals in Asia’s third-largest economy. A relative latecomer to the global market for green debt, India aims to issue 160 billion rupees ($2 billion) of green bonds in the fiscal year ending in March. The nation follows Hong Kong, Singapore and South Korea in selling bonds to lower the nation’s green footprint. 

To prepare for its market debut, India has formed a Green Finance Working Committee, which will be chaired by Chief Economic Advisor V. Anantha Nageswaran. The committee plans to meet at least twice a year to select projects and ensure that funds are allocated within 24 months from the date of issuance, according to the framework.

The committee will also be responsible for reporting on the impact of projects funded by the green bonds. Expenditures must align with widely-used principles from the International Capital Market Association and can’t be double-counted through any other mechanism, the framework said. 

“This framework has been anticipated for a while now, so it’s good that it has been published,” said Nicole Lim, fixed income ESG analyst at abrdn in Singapore. 

“ICMA lays out the core principles of labeled bonds, articulating the structure and disclosure requirements,” she added. “The principles however do not provide guidance on standards of what is ‘green’,” which is why some investors prefer taxonomy from the Climate Bonds Initiative, a nonprofit that helps mobilize global capital for climate action.

The Oslo-based Centre for International Climate Research gave India’s framework a Medium Green rating in its Second Opinion, on par with ratings it has given to Indonesia’s and Kenya’s framework but lower than the Dark Green rating for Denmark and Iceland.

“The framework’s procedures for management of proceeds and reporting appear adequate,” CICERO said in a statement, however, “It remains somewhat unclear exactly how different expenditures’ environmental impacts and risks will be assessed and weighted against each other.”

Here’s more from the draft of the green bond framework:

  • Proceeds from green bonds will be deposited in the Consolidated Fund of India, where a separate account will be created to ensure transparent allocation and accounting
  • India wants to engage a third-party external reviewer to monitor that funds are allocated in line with the green bond framework’s criteria every year

--With assistance from and .

(Updates after the framework was released.)

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