Global green bond market touched $37 billion in 2014: Moody’s
India is looking to raise these low-cost, long-term funds to finance its plan to quadruple its renewable energy production
New Delhi: The global green bond market touched $37 billion in 2014, with countries including China and India offering sizeable growth potential, Moody’s Investor Service wrote in a report released on Wednesday.
India is looking to raise these low-cost, long-term funds to finance its plan to quadruple its renewable energy production and to make it economically viable. Seeking to minimize India’s dependence on coal-fuelled electricity, the Narendra Modi government has pushed renewable energy to the top of its energy security agenda.
The country, which is the world’s third largest greenhouse gas emitter, needs as much as $200 billion to meet its target to install 100 gigawatts (GW) of solar power and 60,000MW of wind power by 2022.
“We expect that the nascent green bond market in Europe and the US (AAA stable) will become more sophisticated, while developing countries such as India (BAA3 positive) and China (AA3 stable) will explore these instruments for the first time, offering sizeable growth potential," said the report.
Referring to the green bonds issued by India’s Yes Bank Ltd and Export-Import Bank of India earlier this year, the report said, “So far, the vast majority of green bonds have been sold by issuers in Europe and the US, where government environmental policies and the associated need to finance projects supporting greenhouse gas (GHG) emissions reduction targets are more advanced than in developing countries. However, some of these countries are starting to make the transition towards more environmentally sustainable economies, which could offer good opportunities for future green bond growth."
In India, the world’s biggest greenhouse gas emitter after the US and China, renewable energy accounts for only 11.79%, or 31,692.14MW, of the total installed capacity of 268,602.35MW. The emphasis on solar and wind power is also expected to strengthen the country’s standing at global climate change negotiations that will culminate at a summit in Paris in December.
Yes Bank raised ₹ 1,000 crore through its 10-year green infrastructure bonds on 24 February, and the Export-Import Bank of India raised $500 million in a dollar bond issue on 24 March.
Other state-owned firms such as NTPC Ltd and Coal India Ltd are also likely to issue green bonds. On 6 May, Mint reported that NTPC, India’s largest power generation utility, plans to raise $500 million each from its first global rupee and green bonds.
However, concerns remain. “The volume of green bonds sold in 2014 tripled to almost $37 billion from the previous year, data from the Climate Bonds Initiative (CBI) shows. The CBI, a not-for-profit organization, and some investment banks think issuance could triple again to $100 billion in 2015, although this looks less likely based on volumes so far this year," the Moody’s report said. According to the report, $7.8 billion of green bonds were issued between January and mid-April as compared with an “average $8.3 billion a month that would be required to hit its $100 billion forecast for the whole of 2015".
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