Despite low ‘greenium’ on sovereign green bond issuances, the Centre at the moment is not contemplating putting a regulatory mandate for financial institutions (FIs) that would require them to invest a portion of their assets in green assets, an official said.
A mandate to FIs such as pension funds and insurance companies could have generated demand for green bonds at relatively high greenium, analysts have said.
For the first time, the Centre mobilised Rs 16,000 crore through two tranches of green bonds in January-February.
The cut-off yield on the bonds — 5-year and 10-year papers — was 2 to 4 bps lower than traditional G-Secs of comparable maturity in the second tranche of Rs 8,000 crore on February 9.
Also read: When will the rupee break out?
The government was not exactly happy with the outcome as it wanted a higher ‘greenium’ or cost advantage to the issuer compared to conventional bonds.
The Centre may do a recalibration of sovereign green bond issuances if the ‘greenium’ to be offered on such bonds in FY24 is not attractive, a senior government source said.
Also read: Crude oil price steady as investors weigh supply and demand drivers
The government will float green bonds close to Rs 24,000 crore in the second half of the current fiscal.
Despite lower returns, many foreign investors set aside funds for investing in green projects as part of their ESG obligations.