The country’s largest lender, State Bank of India (SBI), is in the international bond market to raise nearly USD 500 million in green bonds, making it the maiden issuance for the lender. The tenor of the bonds is expected to be five years and the notes are to be issued by the bank’s London branch. With this issue, SBI will become compliant with the global standards as prescribed by the Climate Bonds Initiative, a global not-for-profit investor-focused organisation.
According to Bank of America-Merrill Lynch, the domestic green bond market has a USD 125-billion opportunity by 2025. It expects around USD 32 billion of such bonds being sold over the next five years.
Over the past two years, domestic companies have raised USD six billion in green bond sales, led by Exim Bank, Yes Bank, Axis Bank and green power player Renew Power. It can be noted that mid-sized private sector lender Yes Bank was the first domestic bank to raise Rs 1,000 crores in green bonds in 2015, followed by CLP India for Rs 600 crores for its wind portfolio. Hero Future Energies raised Rs 300 crores and Axis Bank had raised USD 500 million.
The bank, in 2017, had said that it had an internal approval to raise around USD three billion in green bonds, to finance green projects that do not emit toxic elements, in accordance with the bank’s green bond framework.
International rating agency Fitch has assigned the proposed senior unsecured debt, an expected rating of BBB-. The banking behemoth has reportedly appointed seven investment bankers for the sale, including SBI Cap, Citi and Bank of America, among others, according to market sources.
Globally, green bonds have become popular, with sustainability emerging as the key metric in deciding both financing commitments and the fate of several development projects. Green bond offerings have hit a record USD 155 billion in 2017, according to industry reports and in the first half, it has already touched USD 80 billion, with around USD 15 billion sold in June alone. The government has set an ambitious target of building 175 GW of renewable energy capacity by 2022, up from just over 30 GW now, involving a massive USD 200 billion in funding.