Financing Global Transition Through Green Bonds

Green bonds were first issued by the World Bank in 2008 to push for private sector participation in projects contributing to a better environment and mitigating the risks of climate change. The Intergovernmental Panel on Climate Change (IPCC), which includes more than 1,300 scientists from the United States and other countries, forecasts a temperature rise of 2.5 to 10 degrees Fahrenheit over the next century.

Hence, it was essential to have an alternative mode of financing that would attract investors and global institutions’ attention towards projects, specifically catering to environment friendly projects thereby also ensuring that governments globally achieve their commitments in the reduction of emissions of CO2 and greenhouse gases.

The Indian government, in particular, has introduced measures and brought out amendments to regulations to encourage the construction of renewable energy projects. However, the evolution and growth of environment focused projects is mostly dependent on the modes of financing available in the market. In this article, we shall review primarily the laws applicable to green financing.

Types of Green Bonds

Green bonds are regular bonds with the distinction that the money raised from the investors must only be used to finance projects that are environmentally friendly. More precisely, green bonds finance projects that are aimed at renewable energy infrastructure, energy-efficient buildings, clean transportation, and waste management.

There are primarily four types of green bonds, mainly distinguished based on the collateral or security being provided in the issuance of green bonds:[1]

  • Green ‘Use of Proceeds’ Revenue Bond: These types of green bonds are secured by the projects producing income.
  • Green ‘Use of Proceeds’ Bond: These types of bonds are secured by assets.
  • Green Securitized Bond: These types of green bonds are secured by large pools of assets.
  • Green Project Bond: These types of green bonds are secured by the balance sheet and assets of the project.


Green Bond Principles

The voluntary best practice guidelines called the Green Bond Principles (GBP) were established in 2014 by a consortium of global investment banks.[2]

The GBP accentuates the required transparency, accuracy and integrity of information that will be disclosed and reported by issuers to stakeholders. The GBP has four core components, which include:

  1. Proceeds must be used for green projects;
  2. Process adoption for project evaluation and selection;
  3. Maintaining transparency in the management of proceeds; and
  4. Reporting of information pertaining to the use of the proceeds.

The GBP is a framework devised with the goal of accentuating the role that global debt capital markets can play with respect to environmental and social sustainability.

In India, the Securities and Exchange Board of India (SEBI) notified a circular dated May 30, 2017, which provides for the Disclosure Requirements for Issuance and Listing of Green Debt Securities in India, and the definition of a green bond has been given under the circular, which is within the outline of the International Capital Market Association’s GBPs with certain deviations.

Evolution of  Green Bonds in India

India’s first green bond was issued in 2015 for renewable energy projects such as solar, wind, hydro, biomass and power by Yes Bank. In the same year, another leading banking institution, Exim Bank of India, issued a five-year, $500 million green bond, which is India’s first dollar-denominated green bond.

Subsequently, Axis Bank[3] launched India’s first internationally listed and certified green bond and raised $500 million to finance climate change projects and solutions around the globe and use the bond proceeds to promote green energy in urban and rural areas, transportation and what is called ‘green-blue infrastructure’ projects in India and abroad. KPMG provided third-party independent assurance as per the requirements of the GBP (established by the International Capital Market Association). [4]

Regulatory Framework Governing Green Bonds in India

In 2017, the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS) defined a “green debt security” (GDS) as debt securities used for funding project(s) or asset(s) falling under any of the following broad categories:

Renewable Energy, Clean Transportation, Sustainable Water Management Systems, Climate Change Adaptation, Energy Efficient and Green Buildings, Sustainable Waste Management, Sustainable Land Use, including Sustainable Forestry and Agriculture, Afforestation, Biodiversity Conservation; and any other categories specified by SEBI.

Issuance of listed green debt securities in India must be in compliance with all the following regulations:

  1. Chapter IX of the SEBI operational circular covers the issue and listing of Non-Convertible Securities (SEBI Operational Circular).
  2. The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations).
  3. The SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.

However, there are no specific guidelines mentioned for unlisted green debt securities other than the general requirements for the issuance of unlisted green debt securities.

In the month of February 2022, Finance Minister Nirmala Sitharaman announced in her budget speech that India will issue sovereign green bonds to fund green projects. In FY23, the government will issue sovereign green bonds as part of its borrowing programme. The funds will be used to fund public-sector projects.

In addition to the above, on August 4, 2022, SEBI issued a consultation paper on Green and Blue Bonds as a mode of Sustainable Finance aiming to align with the updated GBP by ICMA and seek public comments on the proposed regulatory framework.

The Ministry of Finance rolled out the Sovereign Green Bonds framework (“Framework”) [5] that has been rated “Medium Green”, with a “Good” governance score by a Norway-based independent second opinion provider, the Center for International Climate Research (CICERO). The issuance of sovereign green bonds will help the Government of India with much needed capital and deploy funds from investors in public sector projects. The investors shall not bear any project related risks. The Government of India shall use the proceeds to finance/refinance projects falling under eligible green projects.

The Framework has provided a list of excluded projects, which include nuclear power generation, landfill projects, hydropower plants larger than 25 MW etc. Any expenditure relating to fossil fuels is excluded. The Green Finance Working Committee, constituted by the Ministry of Finance, will assist in the selection and evaluation of projects. The Framework’s publication will provide much-needed clarity and direction to the government’s initiatives aimed at transforming India into a green economy.

Benefits of Investment in Green Bonds

Green bond investments may lead to sustainable development and achieve the climate change goal, benefitting the environment in the future. Green Bonds will lead to increased funding for emerging sectors such as renewable energy since the Reserve Bank of India has included the renewable energy sector as part of its priority sectors. As a result, banks will have to dedicate a specific portion of their lending book to the priority sector. This will help the credit flow in this sector.

As far as commercial viability is concerned, green bonds typically have a lower interest rate than the loans offered by a commercial bank, which helps to reduce the cost for the issuer or promoter.

Challenges Pertaining to Green Bonds

  1. Green Bonds, especially in the Indian context, are still not very popular as there is a lack of structure and framework and uncertainty about the return on investment.
  2. There are no proper rating guidelines for green bonds or green projects to help investors make their investment decisions and to verify companies’ improvements, which directly impacts the development of the green bond market.
  3. The funds that have diversified investments in various sectors may not find investments in the green sector valuable compared to returns in other non-green projects. There have also been instances where, during the running of the Project, the issuer or promoters have faced queries from the authorities about whether the project falls under the green category or not.

Green Finance

India announced at the COP26 Climate Summit that it will increase its efforts to achieve the goal of net zero carbon emissions by 2070, including doubling its non-fossil energy capacity to 500 gigatonnes. [6] However, there has been growth in green financing in India over the last few years in both the public and private sectors.

It appears that the banks and financial institutions in India are not ready for the green transition as the experience in factoring climate change as a risk factor is not there when undertaking credit appraisals.[7] Even the bond market in India is still evolving, which is confirmed by the fact that green bonds have constituted only 0.7% of the overall bond issuance in India since 2018. More initiatives will be needed from a regulatory perspective to make green bond issuance more attractive by bringing measures that make investments in green bonds attractive as compared to other debt securities in India and in international markets.

Furthermore, as the world’s nations, including the developed world, look to India to lead the global transition, India should take the lead in attracting investments in green finance, which will not only benefit individual investors looking for safe instruments with attractive returns, but will also benefit the country in generating investment.

Leveraging a Healthy Green Bond Market in India

To build a healthy green bond market, one of the most important criteria is to achieve international norms, rules and regulations for green bonds along with a reasonable return on investment. Green financing, as an additional source of funding, must be used by companies and investors to establish projects that reduce the risk of climate change. There is an unprecedented demand for green energy globally, and investments through green financing will become inevitable in the long run.










Image Credits: 

Photo by Towfiqu barbhuiya on Unsplash

Green bonds are regular bonds with the distinction that the money raised from the investors must only be used to finance projects that are environmentally friendly. More precisely, green bonds finance projects that are aimed at renewable energy infrastructure, energy-efficient buildings, clean transportation, and waste management.


Can Environment Protection and Economic Development Go Hand-In-Hand?

Sustainable development is an organising principle for meeting human development goals while also sustaining the ability of natural systems to provide natural resources and preserve the ecosystem services on which the economy and society depend. It is the duty of the State to implement a coherent and coordinated program in which economic development should not be allowed to take place at the expense of our natural resources.

With the principle of sustainable development in mind, the Hon’ble Supreme Court (“Hon’ble SC”) issued a decision on 03.06.2022 in the case In Re: T.N. Godavaraman Thirumulpad vs. UOI & Others[1] to categorically lay down the extent of Eco-Sensitive Zones (“ESZ”) that surround protected forest lands. Strict rules have been laid down with the intention of ensuring that development and preservation of the environment go hand in hand.

What is Eco-Sensitive Zone (ESZ)?

Fragile areas surrounding protected forest lands are known as eco-sensitive-zones (“ESZ”), otherwise known as “shock-absorber” or “transition zones,” and the extent of the ESZ for each protected forest land is declared by the Ministry of Environment, Forestry and Climate Change (“MoEF&CC”). The ESZ for each protected forest is a vital element for preserving and protecting the environment from hazardous activities.

In the year 2002, a ‘Wildlife Conservation Strategy-2002’ was adopted in the meeting of the National Board for Wildlife, wherein lands falling within 10 kms of the boundary of each protected forest land were to be declared ESZ and the Chief Wildlife Wardens of every State were requested to list out areas that fall within 10 kms of the boundaries of the protected forest lands. However, in response, several State Governments raised issues over the applicability of the 10 km rule as certain protected forest lands were located in urban areas, which had an uninterrupted flow of development.

Guidelines For Eco-Sensitive Zone (ESZ)


Taking into account the concerns raised by the state governments, the MoEF and CC issued a guideline on February 9, 2011 to ensure that development does not come at the expense of the environment and vice versa.


In a nutshell, the rules laid down in the Guidelines specifying the extent of each ESZ are as follows:

  • As provided in the Wildlife Conservation Strategy, 2002, the extent of an ESZ can go up to 10 kms.
  • In areas with delicate ecosystems and connecting habitats that suit the needs of a full suite of native animals and plants and are beyond 10 km in width, these shall be included in the ESZ.
  • In the context of a particular Protected Area that is specifically designated by the State Government, the area of the ESZ could be of variable width and extent.

Irrespective of the above guidelines, issues were still being raised before the Hon’ble Supreme Court, seeking modification of the restrictions pertinent to ESZ.  

Observations of Hon’ble Supreme Court

To put the question of ESZ to rest once and for all, the Hon’ble SC in the case In Re: T. N. Godavaraman Thirumulpad vs. UOI & Other, passed an order (“June Order”) that extensively dealt with ESZ and the activities permitted therein. The relevant directions that were laid down in the June Order are as follows:

  1. Each protected forest land must have an ESZ of at least 1 km measured from the protected forest land’s demarcated boundary.
  2. When the ESZ that is already prescribed by law goes beyond 1 km, the wider margin of the ESZ shall prevail.
  3. The minimum width of the ESZ may be diluted with the approval of the Central Empowered Committee, MoEFF & CC, and the Hon’ble SC.
  4. A 10 km buffer zone (ESZ) is to be implemented for any sanctuary or national park for which no proposal has been submitted.

It is noteworthy to mention that the Hon’ble Supreme Court had also observed that the above-mentioned directions may not be feasible for all sites, such as Sanjay Gandhi National Park in Mumbai (“SGNP”), Gandhi National Park in Mumbai (“GNP Mumbai”), and Gandhi National Park in Chennai (“GNP Chennai”), as these sites have gone through tremendous development in close vicinity and are located in urban areas.

However, because the Hon’ble Supreme Court’s observations on special cases were left vague, causing uncertainty, the aforementioned order had a disastrous effect on the Mumbai real estate industry, halting construction in areas surrounding the SGNP and directing local authorities to cancel Commencement Certificates issued to builders.

Subsequently, the CREDAI-Maharashtra of the Housing Industry had filed an Interim Application[1] before the Hon’ble SC, seeking clarification on the applicability of the 1 km rule in special cases such as SGNP. The Hon’ble SC had clearly set forth in the Interim Order that the directions laid down in the June Order are not applicable to special cases as a 1 km wide “no development zone” may not be feasible in all cases. Further, the Hon’ble SC mentioned that specific exceptions with regard to SGNP and GNP Mumbai had already been made in the June Order.


Present Situation of Guindy National Park, Chennai

GNP, Chennai, is a habitat for faunal species and the city’s vital lung, with a land area of 270.57 hectares (ha) and was designated as a Forest Reserve land in 1978, when it was known as the “Guindy Deer Park.” Right from the begining, GNP has been a tourism attraction point surrounded by numerous buildings such as the Gandhi Mandapam, IIT, Cancer Institute, Rajaji Memorial Historical Monument, etc. All of this being a source of pride, GNP has recently become a source of contention in discussions about sustainable development.

On application of the aforementioned Interim Order of the Hon’ble SC, it can be presumed that the ‘1km rule’ laid down in the June Order is inapplicable to GNP Chennai as it has been carved out as a “Special Case”. The relevant portion of the June Order is extracted hereinbelow, for ease of reference.

“We have considered CEC’s recommendation that the ESZ should be relatable to the area covered by a protected forest but the Standing Committee’s view that the area of a protected forest may not always be a reasonable criterion also merits consideration. It was argued before us that the 1 km wide “no development zone” may not be feasible in all cases and specific instances were given for Sanjay Gandhi National Park and Guindy National Park in Mumbai and Chennai metropolis respectively which have urban activities in very close proximity. These sanctuaries shall form special cases.”

However, in pursuance of the June Order, a PIL[2] has been filed by a Social Activist before the Hon’ble High Court, Madras seeking to demolish the headquarters of the Tamil Nadu Forest Department that has been constructed close to GNP Chennai with the alleged intention to protect and preserve the habitat.

An affirmation of the June Order by the Hon’ble High Court, Madras, would therefore dispel all ambiguity with regards to the rules applicable to GNP Chennai and provide the necessary clarification on what path the real estate industry in Chennai could embark on.


[1] W.P. (Civil) No. 202 of 1995 dated 03.06.2022

[1] I.A. No. 110348 of 2022 dated 23.09.2022.

[2] W. P. No. 27372 of 2022

Image Credits: Photo by Amit Jain on Unsplash

The Hon’ble Supreme Court’s observations on special cases were left vague, causing uncertainty and it had a disastrous effect on the Mumbai real estate industry, halting construction in areas surrounding the Sanjay Gandhi National Park in Mumbai (“SGNP”) and directing local authorities to cancel Commencement Certificates issued to builders.


Green Intellectual Property

The damage to the environment has over the last decade or so been a topic of paramount importance. Changes to the same can now be felt closer to home rather than in some remote corner of the globe. The Intergovernmental Panel on Climate Change (IPCC) released a report in 2021 stating that climate change is “widespread, rapid, and intensifying”. We are at the precipice of an important stage in the history of our planet. Never before has technology reached the levels that we have now. It is time to optimally harness technology to protect the environment to sustain future generations. With the literature currently in the media, there is definitely awareness of the damage being caused.

Green technology and innovation thereof will be of paramount importance, and Intellectual Property (IP) rights play a major role. The term ‘Green Intellectual Property’ refers to the protection of innovations in the field of green technology. The UN Rio Declaration on Environment and Development of 1992 stated that Green Technology means “environmentally sound technologies that protect the environment, are less polluting, use all resources in a more sustainable manner, recycle more of their wastes and products, and handle residual wastes in a more acceptable manner than the technologies for which they were substitutes“.

WIPO is playing a huge role in the acceleration of Green IP through WIPO Green ( “WIPO GREEN is an online platform for technology exchange. It supports global efforts to address climate change by connecting providers and seekers of environmentally friendly technologies.”

India, with a huge focus on agriculture, could see smart agriculture come to the forefront. We could also see the rise of water and soil conservation mechanisms, soil re-carbonization and carbon sequestration, etc. In fact, since 2016, over half of the patents granted in India were related to green technologies. In sheer numbers, 61.186 patents were granted in this field, and over 90% of these technologies addressed waste management and alternative energy production methods.[1]

Green IP is likely to lead to the rise of a huge amount of innovation. With innovation comes patent protection. Secrecy may be maintained to maximise market position for innovative technologies that will result in the rise of trade secrets. The aesthetic appearance of new innovations will come under the ambit of protection of design rights. Design rights may also be a valuable right as the use of 3D printing grows as a potentially more sustainable manufacturing technique. The rise of Green IP will also result in the rise of certified trademarks. Software and data evaluation will also play a decisive role in improving existing technologies in an environmentally friendly way. We will also see the rise of technology transfer licensing agreements as companies look to leverage technology developed by others to their advantage. Thus, the importance of Green IP will percolate to an increase in IP protection as well.

For those who are trailblazers in the field, having an IP checklist and an IP strategy will be of importance. Apart from this, the Indian government may also need to look at more subsidies and rebates for the development of Green IP. In a recently published report, Green Future Index 2022, India was ranked among a contingent labelled as “climate laggards”. The country’s COVID-19 recovery plan favours traditional industries, which is hampering the move to greener policies.

Nevertheless, subsidies in official fees for start-ups and MSME’s have pushed these industries to protect their intellectual property. Such a change can also be effected with rebates for the filings for Green IP. With the problems brought about by damage to the environment being closer to home, it is time for India to be at the forefront of the development of Green IP.



Image Credits: Photo by JudaM from Pixabay 

For those who are trailblazers in the field, having an IP checklist and an IP strategy will be of importance. Apart from this, the Indian government may also need to look at more subsidies and rebates for the development of Green IP.


Why Businesses Should Focus on ESG?

The world has changed in many fundamental ways especially in the last 25 years. I am not referring to technology-led transformation or geopolitical shifts, this piece is about Environmental, Social and Governance criteria – collectively referred to as “ESG”.

Environmental Criteria


Environmental costs, which were for long viewed by economists as “externalities”, are now an important consideration in decision-making by governments and business leaders. Given the devastating effects of widespread environmental degradation and climate change, countries around the world are taking concrete actions to limit further damage; many are setting “net zero” emission targets for individual sectors over the next couple of decades. As a result, new legislations are being enacted that require businesses to act in certain ways and desist from other kinds of actions. Arguably, this is the biggest facet of change globally.

Social Criteria


The second area of change is that various forms of social injustice are no longer being tolerated. While there were always rules against such inequities, there is now a greater cost imposed on organizations that violate these rules- not just by governments and regulators, but also by consumers, who choose to shift loyalties towards brands that exhibit greater sensitivity to social causes. By definition, social injustice covers a broad range of issues that includes exploitation of children, women or certain races (e.g., the Uighurs); not providing employees good working conditions (physical environment, denying employees time for bio-breaks and rest, harassment at the workplace etc.); discrimination against people with disabilities, gender, age or marital status; even selling goods that are not safe or bad for health arguably fall under this category.

Governance Criteria


The thrust on “governance” is the third major driver of change. It is not as if rules and regulations did not previously exist to prevent breakdowns in governance. Yet, there are a number of examples from around the world that showcase bad governance: from companies in South Korea, Japan, the USA and Europe to the ongoing matters at the NSE and BharatPe in India.


Why ESG Adoption is Crucial?


In recent years, various members of business ecosystems worldwide, including enterprises, investors, regulators and the general public have become far more aware of the importance of compliance with “ESG” norms and standards. They are much less willing to tolerate breaches in an organization’s “ESG” conduct.

At one level, companies that do not do well on “ESG” parameters are more likely to face explicit financial penalties (e.g., carbon taxes). But just as important are the hidden costs that will increasingly need to be borne by ESG laggards. Perhaps the most important is the reduced access to capital because both banks and PE/VC firms are incorporating ESG criteria into their funding/ portfolio strategies.

On the demand side, many consumers (especially from the younger generations) are more conscious of brands that fare better in terms of their commitment to ESG and this, in turn, shapes their purchase decisions. Brands can quickly lose market share if they do not raise their ESG game.

As shown in the chart below, data over the past decade reveals that companies that have successfully implemented ESG strategies have consistently performed better than other global companies that have not paid as much attention to ESG.


Source: quoted in

This out-performance can be attributed to a combination of factors, including faster top-line growth, sustained cost reductions, higher employee productivity and reduced employee attrition and of course, fewer instances of fines/penalties for non-compliance. Investment decisions and technology choices that are guided by ESG considerations will drive a more efficient allocation of capital; in turn, this will boost ROCE (Return on Capital Employed).

While it is convenient to look at the three strands of ESG separately, in reality, they are closely intertwined. The sooner business leaders acknowledge that ESG is not a fad or a feel-good factor, but in fact, makes sound business sense, the better it is for the world as a whole.


Start Your ESG Journey Right Away

Someone quipped that the best time to plant more trees was years ago, but the second-best time is now! It’s not too late for you to begin your ESG transformation. But make sure you do it as a well-structured program, and not merely a hotch-potch of initiatives that have no clear owners, goals or measures and therefore cannot be sustained.


To report ESG performance, you can take the help of commonly used frameworks such as the following:

  • UN Sustainable Development Goals (SDGs)
  • Global Reporting Initiative (GRI)
  • Sustainability Accounting Standards Board (SASB)
  • Climate Disclosure Standards Board (CDSB)
  • Task Force on Climate-related Financial Disclosures (TCFD)

Image Credits: Photo by Photo Boards on Unsplash

While it is convenient to look at the three strands of ESG separately, in reality, they are closely intertwined. The sooner business leaders acknowledge that ESG is not a fad or a feel-good factor, but in fact, makes sound business sense, the better it is for the world as a whole.