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In January 2023, the Government of India raised Rs. 16,000 crore through its first Sovereign Green Bonds. The money was set aside for green infrastructure projects: renewable energy, clean transport and water management. It was a notable shift because this wasn’t a corporate issuer. It was the central government itself.
India has pledged to source 50% of its electricity from non-fossil fuels by 2030. Getting there needs a lot of capital. Green bonds are one of the tools being used to raise it.
So what exactly are green bonds and should you consider them? Here’s a clear breakdown.
What Are Green Bonds?
Green bonds are bonds where the money raised can only go toward projects with environmental benefits. The issuer decides which projects will get funded, commits to this before the bond is issued and is expected to publish annual reports on where the money actually went.
But how is this different from a regular bond?
In a regular bond, the issuer can spend the proceeds however they like. In a green bond, the spending is tied to specific categories defined by a regulatory framework.
Green Bond Categories Recognised Under SEBI’s Framework
| Project Category | Examples |
| Renewable energy | Solar farms, wind projects and small hydro |
| Energy efficiency | Upgrades in buildings, factories and appliances |
| Clean transportation | Electric vehicles, metro rail and low-emission buses |
| Water management | Sustainable water supply and wastewater treatment |
| Climate adaptation | Flood control, drought resilience projects |
| Green buildings | Projects certified under recognised green standards |
SEBI’s 2023 update also added Blue Bonds for water-focused projects and Yellow Bonds for solar energy specifically.
India’s Sovereign Green Bonds: Key Details
The RBI manages India’s sovereign green bond issuances on behalf of the government. Here’s what you need to know:
| Feature | Details |
| Issuer | Government of India |
| Total raised in FY23 | Rs. 16,000 crore (two tranches) |
| Tenures available | 5-year and 10-year series |
| Where proceeds go | Green projects per the RBI’s Sovereign Green Bond Framework |
| Listed on | BSE and NSE |
| How to buy | RBI Retail Direct platform |
One thing retail investors often ask about is the greenium. This is the yield discount that sovereign green bonds carry compared to a regular G-Sec of the same tenure. You’re accepting a slightly lower return because the money is going toward environmental projects. In India’s early issuances, this discount was small but it’s worth factoring in when you compare yields.
What Is ESG Investing?
ESG stands for Environmental, Social and Governance. In the bond market, it means looking at these factors alongside financial returns when deciding where to put your money.
Buying a green bond is one form of ESG investing. But ESG also applies to who the issuer is, not just what the bond is labelled. A company with poor governance practices issuing a green bond isn’t the same investment as a well-governed PSU doing the same.
What each ESG pillar means for bond investors
| Pillar | What to look for |
| Environmental (E) | Does the project reduce emissions or support clean energy? |
| Social (S) | Does it improve community access to services or support fair labour? |
| Governance (G) | Does the issuer have transparent reporting and independent oversight? |
SEBI’s Business Responsibility and Sustainability Report (BRSR) framework, introduced in 2022, now requires the top 1,000 listed companies to file annual ESG disclosures. This makes issuer-level comparisons more practical than they were a few years ago.
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Who Issues Green Bonds in India?
Beyond the central government, several PSUs and large companies issue green bonds. Some active issuers:
| Issuer | What they fund |
| IREDA | Renewable energy lending |
| Power Finance Corporation | Power sector projects, domestic and international |
| REC Limited | Electricity distribution and clean energy |
| NTPC Limited | Solar and wind capacity |
| Adani Green Energy, ReNew Power | Primarily international market issuances |
Most of these are listed on Indian exchanges. Secondary market liquidity varies by series. Some larger issuances are also listed internationally, including on the London Stock Exchange’s Sustainable Bond Market.
What to Check Before Investing in a Green Bond
The green label doesn’t tell you whether an issuer can repay you. That assessment works the same way as any other bond: credit rating, issuer financials, tenure and liquidity. But there are a few things specific to green bonds worth checking:
- Use of proceeds reporting: Is the issuer publishing annual reports on where the money went? If not, the green label means very little.
- Third-party verification: Has an independent reviewer assessed the bond’s environmental credentials? Look for names like the Climate Bonds Initiative (CBI) or a recognised SEBI-registered reviewer.
- Greenium impact: Sovereign green bonds may yield slightly less than a regular G-Sec of the same tenure. Check both before investing.
- Secondary market liquidity: Not all green bond series trade actively after listing. Verify this if you think you may need to exit before maturity.
Watch out for greenwashing
Greenwashing is when a bond carries a green label without credible commitments on how the money is used. SEBI’s 2023 framework has tightened domestic disclosure requirements. But the safest check is still: look for a named independent reviewer and annual impact reports. If neither exists, don’t rely on the label alone.
How Retail Investors Can Buy Green Bonds in India
- Sovereign Green Bonds: Available through the RBI Retail Direct platform, in primary auctions and the secondary market
- Listed corporate green bonds: Buy through a registered debt broker on BSE or NSE
- ESG-focused debt mutual funds: If you’d rather not pick individual bonds, several mutual funds with ESG mandates hold green bonds in their portfolios
FAQs on Green Bonds and ESG Investing
A green bond is a bond where proceeds must be used for projects with environmental benefits. The issuer publishes annual reports on how the funds were used and deployment is restricted to categories defined by the applicable green bond framework.
Bonds issued by the Government of India, where the proceeds fund eligible green infrastructure. The RBI manages these issuances. India raised Rs. 16,000 crore through sovereign green bonds in FY23, in 5-year and 10-year tenures. They’re available on the RBI Retail Direct platform.
Yes, it does. A greenium is the yield you give up on a green bond compared to a regular bond of the same tenure from the same issuer. Sovereign green bonds in India have been priced at a small discount to comparable G-Secs. It’s not large, but worth checking before you invest.
No. The green label covers use of proceeds, not repayment ability. Always check the credit rating separately.
Look for two things: a named independent reviewer who has verified the bond’s green credentials and annual impact reports showing how the proceeds were actually used. If neither is present, the green label isn’t backed by much.
Disclaimer: Fixed returns do not constitute guaranteed or assured returns. Investments in corporate debt securities, municipal debt securities/securitised debt instruments are subject to credit risks, market risks and default risks including delay and/or default in payment. Read all the offer related documents carefully.
