The country’s largest lender – State Bank of India (SBI) plans to raise around $500 million through green bonds to provide sustainable project finance. The scheme is matched by around ₹8,000 crore (about $1 billion) raised by the Indian government through its first sovereign green bond.
Earlier this month, the Export Import Bank of India, a 100 percent government-owned financial institution, mobilized $1 billion through a 10-year sustainability bond offering. It was the first Indian issuer to open the market for dollar and sustainability bond issues in 2023.
Senior SBI officials said the bank is looking to raise limited funds through green bonds. It is more of an introductory nature. Although not huge, it could be around $500 million.
While the bank is testing the waters, the actual release will depend on market conditions and pricing.
The bank has a pipeline of projects in sectors including renewable energy to mobilize money raised through green bonds, SBI executives said.
The Reserve Bank of India has auctioned five-year government green bonds worth Rs 4,000 crore at a coupon rate of 7.1 per cent, 5 basis points (bps) below the 5-year sovereign yield. An additional Rs 4,000 crore was raised through 10-year bonds sold at 7.29 per cent, 6 bps lower than comparable government bonds. The proceeds will be used for green projects such as solar, wind and small hydropower projects and other public sector projects that help reduce the carbon footprint of the economy. A similar-sized auction is planned for February 9.
SBI executives said the bank has developed an Environmental, Social and Governance (ESG) financing framework under which it intends to issue green, social, and sustainability bonds and loans. It will be used to fully or partially finance or refinance existing or future projects that are expected to have a positive environmental and social impact in India.
Some of the areas in which it can fund projects include clean transportation, climate change adaptation, sustainable water and wastewater management, energy efficiency, and green buildings.
SBI engaged Sustainalytics, an ESG research, valuation and data firm, to review its ESG financing framework.
SBI has also issued green bonds of $800 million from 2018-19 and green loans of €50 million in 2020-21.
It has financed wind and solar power projects with a total capacity of over 3,500 MW. The bank estimates that 5.5 million tons of carbon dioxide emissions will be reduced annually from investments made through these green bonds and loans.