What is India’s 1st Euro Green Bond ?


  • Recently, PFC issues India’s first-ever Euro Green Bond.

  • The Power Finance Corporation Ltd (PFC), the leading NBFC in power sector, has successfully issued its maiden Euro 300 million 7-year Euro Bond.

Key Details  Euro Green Bond

  • The pricing of 1.841% achieved is the lowest yield locked in by an Indian Issuer in the Euro markets.
  • It is the first ever Euro denominated Green bond issuance from India.
  • Moreover, it is the first ever Euro issuance by an Indian NBFC and the first Euro bond issuance from India since 2017.
  • The issuance saw a strong participation from institutional investors across Asia and Europe with a participation from across 82 accounts and was oversubscribed 2.65 times.

Back to basics

What is Green Bond?

  • green bond is like any other bond where a debt instrument is issued by an issuer for raising funds from investors. However, what differentiates a Green bond from other bonds is that the proceeds of a Green Bond offering are ‘ear-marked’ for use towards financing ‘green’ projects.

    Euro Green Bond
    Source: Financial Express
  • The Green Bonds may come with tax incentives such as tax exemptions and tax credits to attract investors. 
  • The World Bank is a major issuer of green bonds. It has issued 164 such bonds since 2008, worth a combined $14.4 billion.
  • As of 2021, India has the second-largest emerging green bond market after China.
  • It was in 2015 that India stepped into the green bond market with YES Bank issuing the first green bond for financing the renewable and clean energy projects. … In fact, GIFT is becoming a preferred platform for listing of green bonds.

Green Bonds vs Climate Bonds

  • The term ‘labelled’ green bonds refers to bonds marketed by the issuer as ‘green’, where the proceeds are for climate / green assets or projects.
  • ‘Climate-themed bonds’ are represented by a broader category of bonds whose proceeds are for climate projects but that are not (yet) labelled as green. It is much wider than the ‘labelled green bonds market’.

Benefits of green bonds 

  • The most vital characteristic of green bonds is that it focuses on garnering positive impact on sustainable development goals and protection of the environment.
  • In addition to this, since these bonds are issued for projects ear-marked as ‘green’, its credentials have the potential to attract a larger pool of investors globally in view of the rapid integration of environmental, social, and governance (“ESG”) metrics in the process of investment analysis.  
  • Apart from being a good alternative to conventional bank debt which is subject to sectoral limitations, green bonds are also an effective tool in driving down the cost of capital and reducing asset-liability mismatches. 
  • Additionally, with the development and growth of the green bonds market in the country, we may see new participants such as debt aggregators who pool loans from banks or developers and issue green bonds, securitising cash flows from the loan pool.  


  • Despite the far reaching benefits of green bonds, there are still certain challenges that persist given that this form of financing is seemingly at a nascent stage and public and private sector project developers are still educating themselves on the utility of green bonds in infrastructure projects.
  • It is imperative to also highlight that demand and performance of green bonds would ultimately depend on the robustness of the bond market of the country. In addition to this, India’s sovereign credit rating of BBB- means that many green bonds would also require credit enhancement to attract international investors.

Way Forward

  • India has the second-largest bond market among emerging markets after China. However, India’s green bond market is less than a tenth of that of China’s, which points to India’s untapped potential.

In order for the Indian green bond market to be an attractive avenue for investors, perhaps the following areas should be of principal focus:

  • Any form of decrease in the cost of raising green bonds in view of the generally high costs of issuing the same in India is key to making it attractive for project developers. This would require regulators like the Reserve Bank of India and SEBI to also get on board.
  • The government may explore formulating principles and standards for certification of climate change projects. From an issuer’s perspective, if the policy framework of the country provides a direct financial or compliance related incentive for tagging projects as ‘green’, the same would also encourage green bonds as a mode of finance.
  • Introduction of projects with prospective green bond issuance and strategic green bond issuances by government and semi-government institutions would help in improving global investor sentiment in the Indian green bond market.


  • In light of the tumultuous economic and environmental climate that the world is experiencing today, adopting a proactive stance on issues that have repercussions on the industry as a whole, is a need of the hour.
  • Promoting green bonds as a form of debt funding, for a sector that is most adjacent to the overall issue, should be the prime focus, as if we fail to adapt and take action now, we will eventually be forced into a consequential shift from a ‘proactive’ to a ‘reactive’ sustainable development policy, where we may have to think even ahead of green bonds as a potential mitigation tool.

Source: PIB & Business Today

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