India share of global green bonds off highs despite record issuance in 2021

The money raised in 2021 is 58.1% higher than $4.3 billion raised in 2017. A lower share would indicate that other countries have been making more use of the mechanism

India had a lower share of the global green bond market in 2021 than it did in 2015. This is despite a multifold increase in the total amount raised during this period.

Indian green bonds raised a total of $6.8 billion in 2021, shows a Business Standard analysis of data from London-based non-profit Climate Bonds Initiative, a tracker of such issuances. This gave it a total share of 1.3 per cent of the issuers for whom data is available. This is higher than 0.4 per cent share in 2020, and the pre-pandemic market share of 1.2 per cent in 2019. It still remains lower than the recent high of 2.7 per cent which was seen in 2017 (see chart 1).

The amount of money raised in 2021 is 58.1 per cent higher than the $4.3 billion raised in 2017. A lower share would indicate that other countries have been making more use of the mechanism to raise money. Green bonds allow entities to borrow money for projects such as renewable energy and projects which will help in adapting to climate change. The government had announced during the budget that it would be looking to raise more money through green bonds.

“As a part of the government’s overall market borrowings in 2022-23, sovereign green bonds will be issued for mobilizing resources for green infrastructure. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy,” said finance minister Nirmala Sitharaman in her budget speech.
 

Stock market regulator, the Securities and Exchange Board of India (Sebi) had come out with disclosure requirements for green bonds in 2017.

“...there are specific global...(pools)...of capital, which are earmarked towards investment in green ventures. This source of capital focuses primarily on environmental, social and governance (ESG) related aspects of the projects in which they intend to invest. Thus, green bonds provide an issuer the access to such investors which they otherwise may not be able to tap with a regular bond...” said Sebi’s memorandum on disclosure requirements for green bonds. 

India, China and Brazil had close to a billion dollars worth of issuances in 2015. India and Brazil now have between $2 billion to $7 billion in issuances. China had $68.1 billion in 2021 (see chart 2).

The outlook for emerging market (EM) green bonds remains robust, according to the ‘Emerging Market Green Bonds Report 2020’ report that Europe’s largest investment company Amundi Asset Management and the US-headquartered International Finance Corporation brought out together in 2021.
 

“Global green bonds outperformed the overall market, extending the cumulative performance since the end of 2017 to 311 basis points. EM green bonds outperformed conventional EM bonds in 2020 and demonstrated lower volatility. Based on secondary market data, the average EM ‘greenium’ stands at -3.4 basis points, which represents 3.5 percent of the average spread of bonds in the sample. As the ‘greenium’ becomes wider, EM issuers will have greater incentive to issue green bonds...” it said.  

The Climate Bonds Initiative expects $1 trillion in green bond investments in 2022.