Updated: Jul 11, 2021
Green bonds are designated bonds intended to encourage sustainability and to support climate-related or other types of special environmental projects. Green Bonds finance projects aimed at pollution prevention, green energy, clean energy, sustainable development, protection of oceans, etc. They also help finance technologies, etc. that can benefit the environment directly or indirectly. For example investing in irrigation systems or better cultivation techniques.
Green Bonds also come with tax incentives such as tax exemptions and tax credits making them a more attractive investment compared to a comparable taxable bond. The tax advantage is what makes this bond really attractive to investors. Since Green Bonds are still a fairly new concept, providing a tax incentive is a very logical thing to promote these bonds. In time I do expect the Green Bonds Tax Advantage to go away, but that will be about 10-15 years away.
Rampur Hydropower Project
The Government of India requested the World Bank's assistance to finance the proposed Rampur Hydropower Project which is being built on the upper reaches of the Sutlej River in the Sihmal and Kulu districts of Himachal Pradesh. The project is currently being developed by SJVN Limited.
Projects like Rampur Project are being financed by World bank and by the Green Bonds. The World Bank is the largest issuer of Green Bonds and is leading the initiative to promote green development.
The Rampur Project has been thoroughly examined on various aspects before the Green Bonds were used to finance it. Resettlement and Rehabilitation of people, power generation capacity,environmental impact, dam safety, etc. are some of the primary aspects which have been looked at by the World Bank.
Green Bonds are here to stay and their use is only going to increase as we look at more sustainable development and growth. Finance is changing and it is going greener.
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