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India’s sovereign green bond (SGrB) market is gaining traction as strong investor demand has resulted in a persistent “greenium”—green bonds trading at lower yields than comparable conventional Government Securities (G-Secs).

• Average greenium in H1 FY2026–27 reached its highest level since India began issuing SGrBs in FY2022–23.
• This suggests stronger market absorption capacity for green bond issuances in the second half of FY2026–27.

What is Greenium?

• Greenium = Green Premium.
• It refers to the lower yield investors accept on green bonds compared with conventional bonds of similar maturity/credit quality.
• Since bond prices and yields move inversely, lower yield indicates higher investor willingness to pay for green bonds.
• Reflects growing preference for environmentally sustainable investments.

Sovereign Green Bonds (SGrBs)

• Government debt instruments introduced in Union Budget 2022–23 to finance India’s transition towards a low-carbon economy.
• Proceeds are earmarked for eligible green projects.
• India’s SGrB Framework (2022) is aligned with ICMA Green Bond Principles, 2021.
• The framework was assessed by CICERO (Norway) and rated “Medium Green” with “Good Governance.”
• SGrBs:
  • Issued through uniform-price auctions.
  • Eligible for repo transactions.
  • Tradable in the secondary market.
  • Eligible for Statutory Liquidity Ratio (SLR) purposes.

Management of SGrB Proceeds

• Proceeds are deposited into the Consolidated Fund of India.
• Managed by the Public Debt Management Cell, Ministry of Finance, through mechanisms such as the Green Register.
• Green Finance Working Committee (GFWC), chaired by the Chief Economic Adviser, is involved in project selection/evaluation.
• Allocation and utilisation are audited by the CAG.

Current Market Trends

• India has about ?877 billion of sovereign green bonds outstanding.
• 30-year green bonds have emerged as the dominant segment, with outstanding issuance exceeding ?500 billion.
• Earlier issuances faced weak demand at yields acceptable to the government, but demand has strengthened, particularly for longer-maturity bonds.

Why is Demand Rising?

• Insurers: Need long-term assets to match long-term liabilities.
• Infrastructure classification: Green bonds are treated as infrastructure investments, providing greater investment flexibility to insurers.
• ALM requirements: Long-duration green bonds fit the Asset-Liability Management requirements of insurers and pension funds.

Why is Greenium Important?

• Lower borrowing cost: Can reduce the government's cost of financing climate-related investments.
• Climate finance: Supports renewable energy, clean mobility and climate-adaptation projects.
• Market maturity: A stable greenium indicates sustained investor confidence in India's green-finance ecosystem.
• Supports India's Net Zero target by 2070.

Sustainable Finance Instruments