IDBI Bank raises $350 million from overseas investors for clean projects

IDBI Bank Ltd, this week became the nation's third issuer of notes whose proceeds would be used for clean energy projects, raising $350 million from overseas investors. Demand was almost triple the amount even as global green bonds gained just 0.78 per cent through October, as against 6.2 per cent a year earlier, according to a Bank of America Merrill Lynch index.

The government's 2022 investment target supports Prime Minister Modi's move to steer the economy away from dependence on fossil fuels toward renewable sources. Around 70 per cent of the outlay would be funded by debt, according to clean energy researcher Mercom Capital Group. Global green bond issuance was projected to surpass $40 billion this year, about 10 per cent more than in 2014, according to Moody's Investors Service.

''The potential for green bonds in the country is tremendous,'' NS Venkatesh, Mumbai-based chief financial officer at IDBI Bank, said in a phone interview on 24 November, Bloomberg reported. ''IDBI has a pipeline of about $2 billion for funding eligible green projects.''

Mumbai-based Yes Bank Ltd issued India's inaugural green bond in February to raise Rs1,000 crore, followed by a Rs320-crore private sale in August, according to data compiled by Bloomberg.

According to commentators, the issuance, coming days ahead of the start of UN Climate Change talks in Paris on 30 November, was another sign that for Asian companies the benefits of diversification and positive branding that green financial instruments brought outweighed the higher costs they had to pay to investors who bought the bonds.

"There has been this extraordinary policy push in India. (State companies) have taken up Prime Minister Modi's mission to grow clean energy and green infrastructure," said Sean Kidney of the London-based Climate Bond Initiative (CBI), an organisation that promotes environmental finance, Reuters reported.

India which accounts for the third largest greenhouse gas emissions, after China and the US, according to the US Environmental Protection Agency, is seeking investments of $100 billion over seven years to boost its solar energy capacity 33 times to 100,000 megawatts.