This western city’s green bond could rewrite India’s climate finance playbook

Calling Surat’s ₹200-crore green bond—oversubscribed almost eight times—“a defining moment" for urban climate finance, Agarwal said the city has proved that municipal credibility can be built on transparency, measurable outcomes, and community engagement.

Indian cities that have issued municipal green bonds include Ghaziabad, Indore, Vadodara, Ahmedabad, and Pimpri-Chinchwad.

“This bond was not meant to be symbolic," she said. “Our focus is to integrate green finance into the way cities plan, fund, and monitor infrastructure. Sustainability should be a financial discipline, not a slogan."

The Surat Municipal Corporation (SMC) became India’s first city to issue an internationally certified municipal green bond, verified by the Climate Bonds Initiative (CBI) in London. The certification ensures that funds are used exclusively for projects with measurable environmental benefits, adhering to global standards of disclosure and monitoring.

The ₹200-crore issue, which opened for subscription on 6 October and closed on 9 October, saw strong investor participation across categories—corporate investors subscribed 7.74 times, Qualified Institutional Buyers (QIBs) 8.82 times, and the retail segment 4.78 times—taking the overall subscription to 7.94 times. The bonds, carrying a coupon rate of 8% and an effective yield of 8.16%, will be allotted on a proportionate basis on 13 October.

“For us, retail participation was particularly meaningful," Agarwal said. “It means citizens now see value in putting their savings behind sustainable projects within their own city."

Agarwal credited the success to institutional backing from both the Centre and the Gujarat government.

“The Surat civic body has benefitted from honourable Prime Minister Narendra Modi’s first-ever series of reforms aimed at promoting green bond issuance and strengthening climate finance in urban local bodies across the country," she said.

Green projects ahead

The funds will support five projects — a 10 MW solar power plant, 6.3 MW wind project, Kosad electric bus depot, 3,000-tonne-per-day waste processing facility, and augmentation of Surat’s water supply systems. All are aligned with India’s Net Zero commitment and aimed at cutting emissions and improving resource efficiency.

Agarwal emphasised that the real achievement lies beyond certification.

“What matters is that this process has shown a city government can mobilise capital independently, responsibly, and transparently — and that’s a lesson other cities can take forward," she said.

“We have been able to do this with the consistent support of both the Central and state governments. The Centre’s push for municipal financial reforms and green urban infrastructure through initiatives such as the Smart Cities Mission, AMRUT 2.0, and the Climate Smart Cities Assessment Framework has created the foundation for cities like Surat to access market-based financing," Agarwal said.

“The state government, through the Gujarat Urban Development Department’s capacity-building initiatives, has guided us closely on regulatory clearances and project design," the Surat Commissioner said.

The Gujarat Urban Development Department is headed by chief minister Bhupendra Patel.

Urban green finance matures

Experts said Surat’s success signals the maturing of India’s subnational debt markets and rising investor interest in city-level sustainability projects.

Kuljeet Chahal, Vice Chairman of the New Delhi Municipal Council (NDMC), said Surat’s Green Bond shows that Indian cities can link good governance with sustainable finance.

“Surat has proved that city governments can raise funds responsibly while working towards cleaner and greener growth. Getting international certification and strong investor interest shows that our municipal systems can meet global standards," he said.

Chahal added that more cities should follow this approach to support India’s climate goals. “Reaching Net Zero by 2070 will need action at the city level, not just national policies. Green bonds give cities the means to build better transport, waste, and energy systems while making citizens part of the solution," he said.

While Indore became the first Indian municipal body to issue a retail green bond in 2023, Surat’s internationally certified issue and broad public participation mark a significant evolution in India’s green debt landscape.

According to the Climate Bonds Initiative (CBI), India issued $55.9 billion in green, social, and sustainability-linked bonds by the end of 2024 — with green debt forming 83%, largely in clean energy and transport. This was bolstered by ₹477 billion in sovereign green bonds that boosted investor confidence. A Council for Energy, Environment and Water (CEEW) study estimates that municipal green bonds in India could mobilise up to $2.5 billion by 2030.

Over the past two years, several cities have demonstrated strong investor appetite for urban climate projects. In February 2023, the Indore Municipal Corporation launched a green bond with a base issue of ₹122 crore and an option to retain oversubscription up to ₹244 crore to finance a 60 MW solar power project; the issue was oversubscribed 5.91 times. The Vadodara Municipal Corporation followed in March 2024 with a ₹100-crore certified green bond that drew bids worth ₹1,460 crore—nearly 14 times its offer. In April 2025, the Ghaziabad Nagar Nigam raised ₹150 crore through green municipal bonds to build a tertiary sewage treatment plant. In Maharashtra, the Pimpri-Chinchwad Municipal Corporation (PCMC) raised ₹200 crore in June 2025, oversubscribed by 5.13 times with total bids of ₹513 crore.