The nation's largest lender State Bank of India Wednesday raised the first tranche of USD 650 million through a maiden green bond offering, which is part of its planned USD 3 billion in such funds for onward lending to green projects.
The five-year dollar money is priced at the US treasury plus 165 basis points, while from for an British investor the coupon will be 3 Libor plus 151 bps.
With this issue SBI will become compliant with the global standards as prescribed by the Climate Bonds Initiative, a global not-for-profit investor-focused organisation.
According to Bank of America-Merrill Lynch, the domestic green bond market has a USD 125-billion opportunity by 2025. It expects around USD 32 billion of such bonds being sold over the next five years.
It can be noted that mid-sized private sector lender Yes Bank was the first domestic bank to raise Rs 1,000 crore in green bond in 2015, followed by CLP India for Rs 600 crore for its wind portfolio. Hero Future Energies raised Rs 300 crore, and Axis Bank had raised USD 500 million.
SBI had last year said it had an internal approval to raise around USD 3 billion in green bonds to finance green projects that do not emit toxic elements in accordance with the bank's green bond framework.
International rating agency Fitch has assigned the proposed senior unsecured debt an expected rating of BBB-.
Of late globally, green bonds have become popular, with sustainability emerging as the key metrics in deciding both financing commitments as well as the fate of several development projects.
Green bond offerings has hit a record USD 155 billion in 2017, according to industry reports and in the first half it has already touched USD 80 billion, with around USD15 billion sold in June alone.
The government has set an ambitious target of building 175 gw of renewable energy capacity by 2022, up from just over 30 gw now, involving USD 200 billion in funding.