Centre's plan to raise ₹20,000 cr via green bonds is conditional on greenium
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Subscribe to enjoy similar stories. NEW DELHI : The Centre will continue with its plan to raise ₹20,000 crore through sovereign green bonds during the second half of 2024-25 only if the market is willing to pay the green premium, two people aware of the matter told Mint. Greenium, or green premium, is the difference between the yield or the return investors receive on a green bond and a similar conventional bond.
It's the amount by which the yield on the green bond is lower due to investors' willingness to accept lower returns in exchange for the perceived benefits of investing in a green instrument. The yield on the benchmark 10-year government bond stood at around 6.828% on Tuesday, down from 6.852% on Monday. On 26 September, the Centre announced that it would raise ₹20,000 crore through sovereign green bonds in H2, FY25.
"Green bonds are attractive instruments to raise funds only if its yield is 20-50 basis points lower than conventional bonds like the 10-year government bond. If the desired yield is not achieved, the auctions will be cancelled," said the first person of the two on the condition of anonymity. To be sure, earlier in June, the Reserve Bank of India (RBI) cancelled a 10-year green bond auction because the market could not pay the premium.
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