State Bank of India plans to raise $500 million via green bonds

The country’s largest lender — State Bank of India (SBI) — is planning to raise around $500 million through green bonds to provide sustainable project finance. This plan coincides with about Rs 8,000 crore (close $1 billion) raised by the Government of India through maiden sovereign green bonds.

Also early this month, Export Import Bank of India, a 100 per cent government-owned financial institution, mobilised $1 billion via a 10-year sustainability bond offering. It was the first Indian issuer to open the markets for dollar and sustainability bond issuances in 2023.

Senior SBI executives said the bank is looking to raise limited amounts through green bonds. It is more of an introductory nature. Although not large, it may be around $500 million. While the bank is testing the waters, the actual issuance will depend on market conditions and pricing.

The bank has a pipeline of projects in areas including renewable energy for the deployment of money raised via green bonds, said SBI executives.

The Reserve Bank of India auctioned the government’s five-year green bonds worth Rs 4,000 crore at a coupon rate of 7.1 per cent, 5 basis points (bps) below the five-year sovereign yield. Another Rs 4,000 crore mopped up via 10-year bonds were sold at 7.29 per cent, 6 bps below comparable government securities. The proceeds will be used for green projects such as solar, wind and small hydropower projects and other public sector projects that help reduce the economy’s carbon footprint. A similar-sized auction is planned for February 9.

SBI executives said the bank has developed an environmental, social, and governance (ESG) financing framework under which it intends to issue green, social, and sustainability bonds and loans. It will use the proceeds to finance or refinance, in whole or in part, existing or future projects that are expected to create positive environmental and social impact in India.

Some of the areas in which it could fund projects include clean transportation, climate change adaptation, sustainable water and wastewater management, energy efficiency, and green buildings.

SBI had engaged Sustainalytics, an ESG research, ratings, and data firm, to review its ESG financing framework.

SBI has also issued green bonds worth $800 million since 2018-19 and a green loan worth €50 million in 2020-21.

This has helped finance wind and solar energy projects with a total capacity of more than 3,500 megawatt. The bank estimates the investments made through these green bonds and loans to have an annual emission reduction potential of 5.5 million tonnes of carbon dioxide.