GSS Bonds- Green Social Sustainability bonds

1. Green Social Sustainable (GSS)
Bonds
Literature Review Study 1
Patham/ Sep 2023

2. What is GSS
Bonds
• Any type of bond instrument where proceeds will be exclusively
applied to finance or re-finance any new or existing
environmentally focused projects
• It is a Fixed-income Debt instrument
• Green Bonds: these are the Bonds with proceeds earmarked for
positive environmental impact projects like renewable energy, Green
buildings, sustainable water, or clean transportation.
• Social Bonds: The bond proceeds are invested in activities that will
bring positive social impacts, such as investment that targets
poverty or provides access to essential services, affordable housing,
education or healthcare
• Sustainability Bonds – the bond with proceeds earmarked for
projects aimed at generating positive environmental and social
impact (a combination of green and social activities described
above).
2

3. What is Sustainability-linked
bonds?
• Sustainability-linked (SLB) bonds – the bond proceeds from
issuance are not ring-fenced to green or sustainable purposes,
unlike “use of proceeds” green bonds or sustainable bonds
• SLB issuer makes a commitment to achieve pre-defined key
sustainable performance targets, and the financial characteristics
of the bond depend on the achievement of key performance
indicators (KPIs) and the proceeds at may be used for general
corporate purposes
• SLB are a forward –looking performance based Debt instrument
• Penalties apply to SLB in case if the target performance is not
achieved
3

4. Market overview
• The cumulative amount of GSS bonds issued was USD 3.8
trillion at the end of 2022.
• Green bonds represent 64% and emerging market issuances
16% of the total amount.
• In 2022, GSS bond issuances reached USD 948 billion, a 19%
decrease compared to 2021.
• Across all labels, social bonds saw the largest decline in
volume (-39%) in 2022 compared to 2021.
4

5. Who can issue GSS Bonds
• World Bank
• Government
• RBI and Nationalised Banks
• Mutual Fund organisations
• Financial Institutions
• Other Corporations who have GSS Projects
5

6. Green Bond Categories Project Description
Renewable Energy • Wind, Solar etc
• Related infrastructure
Energy Efficiency • Building efficiency including environmental systems
• Smart grids
Pollution prevention and control • Waste Water management
• Reduction in carbon emission
Sustainable management 0f natural
resources
• Sustainable agriculture
• Reduction in carbon emission
Bio-Diversity Conservation • Protection of coastal, marine & and watershed management
• Nature reserve management
Clean transportation • Public transportation and related infrastructure
• Alternative fuel vehicles
Sustainable water management • Infrastructure for clean and / or drinking water
• Energy recovery from waste water
Responsible Waste Management
• Reduce, reuse, recycle, recover, and residual management
6
Eligible for Green Projects and Green funding
The types of green bonds are constantly evolving as the market matures

7. GSS Bond Principles- a voluntary guideline
7
•ICMA has issued guidelines for GSS Bond and the same may be followed for
uniformity
Main Element of a Green
Bond
Primary duties of the issuer
Use of Proceeds
 Bond proceeds should be designated for eligible Green Projects with clear descriptions in
the legal document upfront.
 These projects must provide verifiable and quantifiable environmental benefits.
Process for Project
Evaluation and Selection
 Issuers should clearly communicate the objectives, fitness determination method, eligibility
criteria, and associated risks of Green projects.
Management of Proceeds
 The money earned from the Green Bond should be put into a separate account and
monitored by the issuer to make sure it's being used properly.
 The amount in this account should be adjusted regularly to match the funds allocated to
eligible Green Projects.
 An auditor or third party should verify and certify that the tracking method and allocation of
Green Bond funds to green projects is accurate.
Reporting
 Bond Proceeds usage to be reviewed and reported annually.
 Annual Report to include project list and details of allocation, amount, and expected
impact.

8. Green Bonds in India
• India's Sustainable Finance Market
• India is the sixth largest issuer of green, social, sustainable, sustainability-linked, and transition bonds
(GSS+) in the Asia Pacific Region, according to unpublished data from Climate Bonds.
• By the end of 2022, Climate Bonds had recorded GSS+ bonds from 43 sovereigns with combined
volumes of USD323.7bn.
• Despite its vast potential, India has raised negligible amounts through green bond issuance, which has
seen remarkable growth globally.
Source: Statista
8

9. 9
Green Bond Challenges and Opportunities
1. Investors, issuers, and regulators lack
understanding of green bonds, causing
compliance issues and reduced demand.
2. Clear regulations aligned with global best
practices, such as the Green Bond
Principles and Climate Bonds Initiative, are
crucial for investor confidence in the green
bond market.
3. Reporting of “use of proceeds” and
Reviews of the projects by qualified
persons
1. Education and awareness campaigns
are necessary to explain the benefits
and workings of green bonds.
2. The Securities and Exchange Board of
India (SEBI) guidelines recently refined
and aligned with international standards,
to bolster investor confidence.
3. The new SEBI guidelines ensure robust
oversight, monitoring, and reporting
mechanisms to maintain the integrity of
the green bond market and to foster
investor trust.

10. 10
Green Bond Challenges and Opportunities (Continued)
5. India needs more qualified green projects
for its green bond issuance. Many
sustainable projects face finance and
bankability challenges, making it difficult
for investors to evaluate their
environmental effects and financial
sustainability
6. Green bond issuances in India face pricing
challenges due to increased costs from
external evaluations, certifications, and
reporting.. Many Indian issuers opt to issue
green bonds in the international market for
tighter pricing and the benefit of
"Greenium".
5. Sustained awareness programs with
the objective of Encouraging more
green initiatives and offering technical
and financial support can increase the
supply of qualified projects.
6. To make green bonds more profitable
for issuers, various financing methods
like green bond insurance,
concessional funding, tax benefits, or
carbon credits can be used.

11. ADD A FOOTER 11
Issuer Amount
Issued
Date
Tenure Type of Bond Sector Exposure Credit Rating
Yes Bank INR 10bn Feb-15 10 years NA Energy AA+ (CARE and ICRA)
EXIM Bank USD500m Mar-15 5 years NA Transport, Energy Baa3 (Moody’s)
CLP Wind Farms INR6bn Sep-15 3, 4 and 5 years Asset-backed Energy AA (India Rating and Research)
IDBI Bank USD350m Nov-15 5 years NA
Energy, Transport
and Water Mgt
BBB- (Fitch)
Hero Future Energies INR 3bn Feb-16 3 and 6 years Asset-backed Energy NA; CBI Certified
PNB Housing Finance INR 5bn Apr-16 NA NA Buildings NA
Axis Bank USD500m Jun-16 5 years Senior, Unsecured
Energy, Buildings
and Transport
GB1 – Green Bond Rating;
Issuer rating Baa3 (Moody’s)
ReNew Power INR 5bn Aug-16 NA Asset-backed Energy A+ (CARE)
NTPC INR 20bn Aug-16 5 years Unsecured Energy BBB (Fitch)
Greenko USD500m Aug-16 7 years Energy
ReNew Power USD475m Feb-17 5 years Asset-backed Energy Ba3 (Moody’s); B+ (Fitch)
IREDA INR 7bn Mar-17 10 years
Government-
guaranteed bond
Energy AA+ (ICRA)
Rural Electrification Corpn USD450m Jul-17 10 years Senior Unsecured
Energy, Water
and Waste Mgt
Baa3 (Moody’s)
Azure Power USD500m Aug-17 5 years NA Energy BB- (Fitch)
IREDA INR19.5bn Sep-17 5 years
Government-
backed
Energy
GB1 – green bond rating; Baa3 –
issuer rating (Moody’s)
Power Finance Corporation USD400m Dec-17 10 years NA Energy Baa3 (Moody’s)
Indian Railway Finance Corpn USD500m Dec-17 10 years Senior Unsecured Transportation Baa2 (Moody’s)
ReNew Power USD375m Mar-19 5 years NA Energy BB (Fitch)
Adani Green Energy USD500m Jun-19 5 years Senior Secured Energy BB+ (Fitch)
Greenko USD950m Jul-19 5 and 7 years
Organisation-
backed
Energy Ba1 (Moody’s)
Greenko USD300m Aug-19 3.5 years
Organisation-
backed
Energy Ba1 (Moody’s)
ReNew Power USD300m Sep-19 3 years NA Energy Ba2 (Moody’s)
Azure Power USD350m Sep-19 5 years NA Energy NA
State Bank of India USD650m Sep-19 5 years
Government-
guaranteed bond
Energy BBB- (Fitch)
Adani Green Energy USD362m Oct-19 20 years NA Energy BBB- (S&P)
ReNew Power USD450m Jan-20 Avg 5.5 years NA Energy BB- (Fitch)
State Bank of India USD100m Mar-20 2 years
Government-
guaranteed bond
Energy BBB- (Fitch)
Given below is a list of key green bond issuance in India –
Source: Climate Bonds Initiative; Organization press releases; News articles