Information Asymmetry In Green Bonds Causing Greenwashing, Says SBI Chairman

The cost of green bonds continues to be higher in India, and information asymmetry is causing some greenwashing, said State Bank of India Chairman Dinesh Kumar Khara.

Greenwashing refers to the practice of making false promises about a product's environmental benefits.

At a time when the importance of a climate-resistant economy is rising, India needs a proper policy framework for green bonds, Khara said. Indian taxonomy on a par with that of Europe and the creation of audit standards to help corporates have credible data for green initiatives are also the needs of the hour, according to Khara.

He was speaking at the Federation of Indian Chambers of Commerce and Industry’s day-long ESG Summit in Mumbai.

The Indian rupee-denominated green bond issuances are expected to gain momentum in FY24, he said. Since more companies are now participating in the green bond market, blended finance and risk sharing abilities are also being utilised, he added.

The Indian government aims at issuing sovereign green bonds worth Rs 20,000 crore by March, as disclosed in its latest borrowing plan.

With sustainable and ESG finance blooming, even the yellow and blue bond market is expanding in India, he added. Yellow bonds pertain to solar energy, and blue bonds pertain to the marine sector.

Talking about India’s sustainable development goals, Khara said that the country needs an investment of $600 million per annum to achieve them.

“Indian companies are secured on the sustainability index for emerging markets and adopting ESG norms,” Khara said.

Since efforts are being directed towards green projects, India’s goal of meeting 50% of its electricity requirements from renewable sources by 2030 is also a significant step, according to the SBI Chairman. With green finance playing a pivotal role in achieving net zero emissions, India’s capital requirement is expected to be 11% of GDP, compared to the global average of 7.5%, he added.

Here, private capital, institutional investors, green bonds, sustainability bonds—all will play a very important role.