Govt may release green bond framework today; financing under 9 categories

The central government will finance projects and initiatives in nine broad categories through its Rs 16,000 crore green bond offering this year and future issuances, Business Standard has learnt. The Finance Ministry’s Green Bond Framework is set to be put in public domain Wednesday evening.

These categories are renewable energy, energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management, pollution prevention and control, green buildings, sustainable management of living natural resources and land use, and terrestrial and aquatic biodiversity conservation. The projects will cover renewable energy, energy efficient buildings, electrification of public transport, climate resilient infrastructure, to organic farming, flood and climate warning systems to land and marine biodiversity projects. (see chart).

It is learnt that the proceeds from green bond issuances will be deposited in the Consolidated Fund of India in line with the regular treasury policy, and they will be then made available for eligible green projects. For the purposes of ensuring that the proceeds’ allocation and accounting is transparent, a separate account will be created and maintained by the Ministry of Finance.

A Green Finance Working Committee (GFWC), chaired by the Chief Economic Advisor, will decide projects that are eligible. The GFWC will meet at least twice a year to select and evaluate projects.

The GFWC will have members from implementing departments, Ministry of Environment, Niti Aayog, and the Finance Ministry’s Budget Division and Infrastructure Finance Secretariat. It can also co-opt additional members depending on the requirement, from time to time, and other ministries and sector experts may be consulted to ensure that the selected projects are in line with the intended objectives. The GFWC will also release an annual report on the status of green projects which are being financed by the government.

The projects expected to be excluded from financing are those involving new or existing extraction, production and distribution of fossil fuels, nuclear power generation, direct waste incineration, alcohol, weapons, tobacco, gaming, or palm oil industries, renewable energy projects generating energy from biomass using feedstock originating from protected areas, landfill projects, and hydropower plants larger than 25 MW.

It is learnt that the centre’s Green Bond Framework has been reviewed by CICERO, which has issued an independent Second Party Opinion. It has approved the alignment of the Sovereign Green Bond Framework with the ICMA Green Bond Principles.

The four core components as outlined by ICMA (International Capital Markets Association) green bond principles are: use of proceeds, project evaluation and selection, management of proceeds, and reporting. These are all being fulfilled by the centre’s framework.

Green Project Category	Eligibility Critera
Renewable Energy	Investments in solar/wind/biomass /hydropower energy projects, Incentivizing adoption of renewable energy
Energy Efficiency	Design and construction of energy-efficient, energy saving systems in government properties. Supporting public lighting Improvements, Supporting construction of new low-carbon buildings, energy-efficiency retrofits to existing buildings, Projects to reduce electricity grid losses.
Clean Transportation	Promote public transportation electrification and transport safety, Subsidies to adopt clean fuels like electric and supporting infrastructure.
Climate Change Adaptation	Projects aimed at making infrastructure more resilient to impacts of climate change, investments in information support systems, such as climate observation and early warning systems.
Sustainable Water and Waste Management	Promoting water efficient irrigation systems, Installation/upgradation of wastewater infrastructure, Water resources conservation, Flood defence systems.
Pollution Prevention and Control

Projects targeting reduction of air emissions, greenhouse gas control, soil remediation, waste management, recycling, reduction and energy/emission-efficient waste-to-energy Green Buildings Projects related to buildings that meet regional, national or internationally recognized standards or certifications for environmental performance. Sustainable Management of Living Natural Resources and Land Use Environmentally sustainable management of agriculture, animal husbandry, fisheries, Sustainable forestry management, Support to certified organic farming. Research on living resources and biodiversity protection. Terrestrial and Aquatic Biodiversity Conservation Projects relating to coastal and marine environments, Projects related to biodiversity preservation, including conservation of endangered species, habitats and ecosystems.