IFC backs first ‘official’ Indian green bonds

Approved by the market regulator, the $103m offering could encourage more issuances to support renewables projects and climate-friendly initiatives in the country.

The International Finance Corporation has invested 6.67 billion rupees ($103 million; €90 million) in L&T Infrastructure Finance’s green bonds in a bid to boost solar financing in India. 

L&T Infrastructure Finance Company, a wholly owned subsidiary of L&T Finance, will use the capital to give loans to solar projects in the country. Renewable energy financing currently accounts for 37 percent of the company’s 228 billion-rupee portfolio. 

The L&T offering is the first sale of its kind after the Securities and Exchange Board of India, the capital markets regulator, came out with rules governing green bond issuances at the end of May. The guidelines specify what qualifies as “green bonds” and identify eligible sectors, namely renewable energy, clean transport, sustainable water, land management, climate change adaptation and energy efficiency. 

The IFC had invested $50 million in Yes Bank and $75 million in PNB Housing Finance through “instruments that would qualify as green bonds” before the SEBI circular was released. 

In 2015, the institution worked with domestic conglomerate Tata Group to set up Tata Cleantech Capital, the country’s first “green investment bank”, and made $170 million of wholesale investments in financial intermediaries that support climate change-related programmes in India. 

India needs $2.5 trillion to meet its climate change mitigation targets by 2030, the IFC said. It expects the first SEBI-approved green bonds to prompt other such programmes. 

“L&T Infrastructure Finance is a leading financier to the renewable energy sector and this green bond subscription will serve as a catalyst for corporates to issue green bonds and provide the impetus for financiers to stay invested for a longer-term,” said Jun Zhang, the IFC’s India head.