India sells first green dollar bond under Obama solar pledge

India has sold the country’s first green dollar bonds in a $500 million issue of 2.75 percent notes on 24 March.

Export-Import Bank of India that financially supports country’s solar and wind program has achieved this.

Modi got a pledge from US President Barack Obama for unspecified funding to raise solar production to 100 GW by 2022, aiming for more aid ahead of a climate summit in Paris in December.

India’s issuance of overseas securities meeting environmental criteria overseen by the Zurich-based International Capital Market Association could surge to as much as $1.5 billion annually in the next two to five years, according to Commerzbank.

Modi pioneered India’s first solar incentives and restored wind-farm tax benefits in July after a two-year hiatus.

That’s driven a rally in convertible notes of Suzlon Energy that caused India’s biggest default of such debt in 2012.

Expanding appeal Exim Bank priced its five-year securities to yield 147.5 basis points over similar Treasuries, according to Bloomberg.

That compares with an average 266 basis points on international bonds from Indian issuers, according to Bank of America Merrill Lynch indexes.

The sale from Exim Bank was the third US currency green note in Asia outside Japan.

The first were 1.75 percent notes sold by Export-Import Bank of Korea in 2013 and 2.125 percent securities from Taiwan’s Advanced Semiconductor Engineering.

Yes Bank sold the nation’s first local-currency notes tied to climate projects last month in a Rs.1,000 crore offering of 10-year securities.

The lender is in talks with International Finance Corp. to offer the equivalent of $50 million more in such securities.

Global investors are seeking to expand profits in climate finance amid negotiations among more than 190 nations on a new agreement to fight climate change effective in 2020.

Deutsche Bank said last month that it wants to boost green bond investment to €1 billion ($1.1 billion), joining Citigroup and Barclays Plc in expanding in the market.

Modi must balance efforts to add more environmentally sustainable power with promises to bring universal access to electricity to India’s 1.24 billion people.

While green bonds carry risks to issuers including the costs of additional reporting and breaches of use-of-proceeds clauses, expanding demand will drive increasingly favorable terms, according to Bloomberg.

Sabeena Wahid