The State Bank of India (SBI), India’s biggest bank, will issue $3bn in green bonds.
What’s a green bond?
When a company wants to raise money, they can ask investors on the debt capital markets to invest in a bond. The company then makes interest payments (the coupon) and when the bond matures, the investors are repaid. So a bond is a form of debt, and it can be bought and sold.
Now, the money raised via a green bond can only be used on projects which are environmentally friendly.
Green bonds are becoming increasingly popular, as economies around the world grapple with climate change. As a result, big global financial institutions like BlackRock and JP Morgan are setting aside funds for green investments.
India’s green bond market is seen as one to watch, given the government’s environmental targets. India is keen to support the development of renewable energy infrastructure projects.
Indian banking knows
SBI isn’t the first Indian bank to go green.
Private banks Axis, IDBI and Yes have all tapped the green bond markets.
Meanwhile, state backed banks like Punjab National Bank and Canara fund green initiatives and actively encourage their customers in the construction industry to build in an environmentally friendly way.