SBI's plans to raise dollar funds through green bonds' issue put on hold

Keeping in view the uncertainty and higher costs of the fund, the bank has decided not to go ahead with the plan for the time being, says a senior executive with the global lender

The country’s largest lender State Bank of India has kept on hold plans to raise dollar funds through maiden issue of green bonds, due to high volatility in international markets.

SBI was looking to raise over $500 million through green bonds and it moved early this quarter to tap the global market. The situation turned adverse in light of the crisis in markets like Turkey and Argentina, making the market borrowings costly, merchant banking sources said.

Keeping in view the uncertainty and higher costs of the fund, the bank has decided not to go ahead with the plan for the time being, said a senior executive with the global lender. SBI executives could not be reached for a comment. The bank was engaged in investor calls and was to decide on the issue size and likely pricing only after getting a commitment.

A private lender and a renewable energy company from India had also evinced interest to raise money through global green bonds.

Green bonds are regular bonds, the proceeds of which are used to fund sustainable green projects. A certification is needed by the issuer from agencies, to show to investors. These bonds generally attract lower coupon than regular bonds and some international investors are allowed to invest only in green bonds.

Banking sources said the bond yields are showing upward trajectory in the current conditions.

The bank plans to raise up to $3 billion in green bonds over a period and is working under a framework set by KPMG and Climate Bonds Initiative, which determines eligibility criteria for green projects and provides the requisite transparency and disclosures for investors.

SBI has committed to the government to finance viable renewable energy projects worth Rs 816 billion over a five-year period (2015-2020).

According to the bank’s green bond framework, the proceeds would be used for giving loans for renewable energy, including solar, wind, hydropower and geothermal, and low carbon buildings, industry and energy-intensive commercial, energy efficiency processes, waste and pollution control and sustainable transportation projects such electric vehicles.

Typically, for an emerging markets issuer raising funds from Europe, the percentage of such dedicated green bonds would be at least 40 per cent, whereas for an Indian issuer, the percentage is lower as green standards are not well defined in the country, according to a source familiar with the issuer.