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Green Bonds

Green bonds mechanisms

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Tarek Mgh
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40 views9 pages

Green Bonds

Green bonds mechanisms

Uploaded by

Tarek Mgh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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GREEN

BONDS
EXPPLAINED
What are Green
Bonds?
Green bonds are a sort of debt issued by
public or private entities to finance
themselves, and unlike other credit
instruments, they commit to allocate the
cash raised to an environmental or
climate change initiative.

Vinayak Narvekar
Uses of Green Bonds?

Renewable Energy Energy Efficiency

Clean Transportation Waste Management

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How do Green
Bonds work?
Green bonds are similar to regular bonds,
but the money raised goes towards
environmental projects like renewable
energy or clean transportation. Investors
loan money to the issuer, who pays them
back with interest. It's a way to invest and
support environmental efforts.

Vinayak Narvekar
Advantages
Environmental Impact: Investors can align
their financial goals by supporting projects
that benefit the planet.
Higher Returns: The growing demand for
green bonds could lead to higher returns for
investors.
Positive Reputation: Issuing green bonds can
enhance a company or government's
reputation for environmental responsibility.

Vinayak Narvekar
Disadvantages
Greenwashing Risk: There's a risk of
"greenwashing" where companies might use
green bonds to finance non-environmental
projects.
Limited Transparency: Verifying whether
green bond proceeds are truly used for
environmental projects can be challenging.
Lower Liquidity: The green bond market is
still developing, so bonds may be less liquid
than traditional bonds, making it harder to
sell them quickly if needed.

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Types of Green
Bonds
Sovereign Green Bonds are issued for an
average tenure of 14 years or more. These
Bonds are allocated to fund projects
associated with climate adaptation and
climate mitigation.
Hybrid bonds offer investors protection if
the borrower defaults, by allowing them to
claim assets other than the initial project
(like a farm) if needed.
Asset-backed bonds for solar farms are like
loans specifically for the farm itself. The
farm's income pays investors back, not the
company's overall finances. This isolates the
risk for investors.

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Example
A good example of a green bond in India is the
Greenko Group bond issuance. Greenko is a
leading renewable energy company in India.
They issue green bonds to fund their projects in
solar, hydro, and wind power across various
Indian states.
This means investors who buy Greenko's green
bonds are essentially contributing to increasing
India's clean energy capacity.

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THANKS FOR READING!

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