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  • 12 March, 2021

  • 4 Min Read

Green Bonds

Green Bonds

  • India has announced its intention to achieve all the United Nations Sustainable Development Goals (SDG) by 2030.
  • The first green bond was issued in 2015.
  • This is an alternative to the Kuznets hypothesis that is used by developed countries to achieve SDG goals
  • A green bond is a fixed-income instrument designed specifically to support specific climate-related or environmental projects.

The green bond market in India includes:

  • Corporates issue green bonds for a period of 3-5 years. Banks opt for a longer tenure.
  • The US dollar and Indian Rupee are two preferred currencies.
  • The National Thermal Power Corporation and the International Finance Corporation started the overseas ‘Masala Bond’ market.

Environmental Kuznets Curve:

As per the Environmental Kuznets Curve, the environment of a country degrades in the initial stages of industrial growth.

  • After a certain level of economic growth, the society begins to improve its relationship with the environment and levels of environmental degradation reduces.
  • The pollution reduces with greater protection of the environment, technological improvements, diversification of the economy from manufacturing to services, and increasing scarcity and prices of environmental resources.

What is a Bond?

  • A Bond is a fixed income instrument that represents a loan made by an investor to a borrower.
  • It acts as a contract between the investor and the borrower.
  • Most companies and governments issue bonds and investors buy those bonds as a savings and security option.
  • These bonds have a maturity date and when once that is attained, the issuing company needs to pay back the amount to the investor along with a part of the profit.

Source: TH


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