A sovereign green bond is a debt instrument issued by the central or state government to borrow money from investors with the commitment that the mobilized fund will be spent on climate or ecosystem-related activities. The issuance of green bonds will be part of the government borrowing this year.

The issuance of Sovereign Green bond was announced by The Union Budget 2022-23 and In furtherance of that, The Finance minister approves the “Sovereign Green Bonds framework”. It is pertinent to mention that this step is taken keeping in mind India’s commitment to achieving net-zero carbon emissions by 2070.

Sovereign Green Bonds issuances under the framework will help the government tap funds from potential investors for public sector projects to reduce carbon intensity which is a measure of greenhouse gases

The framework deals with various sectors and lists activities that can be considered to achieve the purpose of sovereign green bonds. For example, in the renewable category, the framework lists activities such as investment in solar, wind, biomass, and hydropower energy projects.

Green projects, according to the framework, include renewable energy, energy efficiency, clean transportation, climate change adaptation, green building, sustainable management of living natural resources and land use, sustainable water and waste management, pollution prevention and control, and terrestrial and aquatic biodiversity conservation projects.

The framework also prescribes the formation of a “Green Finance Working Committee” (GFWC) in order to oversee the issuance of Green Bonds and The responsibilities of the GFWC would include selecting projects that pass the required criteria, reviewing the proceeds in a time-bound manner, finding suitable replacements in case a selected project is canceled or postponed, preparing an annual report on how proceeds have been allocated, and assessing the carbon footprint of these projects.