Why has India allowed FIIs to invest in its green bonds?

Context: RBI has allowed Foreign Institutional Investor (FII) to invest in Sovereign Green Bonds (SGrBs)

Sovereign Green Bonds (SGrBs):

• Government debt aimed at funding India’s transition to a low-carbon economy.
• Offer lower interest rates compared to conventional G-Secs, known as a greenium.
• Adoption of greenium is encouraged by financial institutions to accelerate the transition to a greener future.

Measures to facilitate SGrBs

• The 2022-23 Union Budget introduced SGrBs to finance projects such as offshore wind, solar power, and EV transition.
• Concerns about greenwashing led to the release of India’s first SGrB Framework by the Finance Ministry in November 2022.
• The framework lists eligible projects like renewable energy investments, energy-efficient buildings, public transport, and EV subsidies.

Benefits

• Supports funding for ambitious net-zero goals pledged by Prime Minister.
• Diversify green investments and gain green credentials.
• Addresses greenwashing concerns, makes green investments in India attractive.

Source: The Hindu