What is a green bond?

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A green bond, like any other bond, is a fixed-income financial instrument for raising capital through the debt capital market. In its simplest form, the bond issuer raises a fixed amount of capital from investors over a set period of time, repaying the capital when the bond matures and paying an agreed amount of interest (coupons) along the way. (KPMG)

green economyA green bond is a tax-exempt bond which is issued by federally qualified organizations and/or municipalities for the development of brownfield sites. Brownfield sites are areas of land that are under utilized, have abandoned buildings, or are under developed. They often contain low levels of industrial pollution.

These bonds are created to encourage sustainability and the development of brownfield sites. The tax-exempt status makes purchasing a green bond a more attractive investment when compared to a comparable taxable bond.  (http://www.investopedia.com/terms/g/green-bond.asp)

Globally, Green Bonds issues amounted to almost $35 billion worldwide in 2014 while the market in India is still nascent/non-existent. The first such green (infrastructure) bond issuance in India by YES Bank will catalyse the market for green infrastructure bonds in India and allow responsible investors to facilitate funding towards Renewable and Clean Energy projects.

Download: KPMG’s Report on Gearing up for green bonds

 

 

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