Advantages of Green Bonds | Fusion - WeRIndia

Advantages of Green Bonds

Advantages of Green Bonds

Bonds are debt instruments. They are issued by entities to raise funds from investors. These are known as green bonds. They are quite similar to any other type of bond which is issued by an entity to raise funds. The main difference between a green bond and normal bond is that green bonds are used for financing ‘green’ projects.

When an entity is issuing a green bond, they are issuing it to raise capital for a green project. These include assets of business activities which have an environmental benefit like renewable energy, low carbon transport, solar energy etc.

There are several benefits for issuing green bonds.

  • The first and foremost benefit of issuing a green bond is that it can improve the reputation of the issuer. Green bonds’ issuance suggests a commitment to environment friendliness. It shows that the issuer is committed towards developing environmental friendly solutions. This will improve the faith of investors. Furthermore, issuance of a green bond also can generate positive publicity for the issuer.
  • Another benefit is that there is a specific global pool of capital, which is earmarked towards investment in Green Ventures.
  • There are many global investors who have a lot of focus on the environmental, social and governance (ESG) related aspects of projects in which they want to invest. Issuing a green bond helps the investor know about the intentions of issuer. They might be able to pull in investors who won’t otherwise be interested.
  • Issuing a green bond attracts a wide range of investors. This is an obvious benefit for the issuer when it comes to better pricing of their bonds vis-a-vis a regular bond.

With so many benefits for the issuer and the global investor community putting increasing focus on environmental aspects of projects, issuing a green bond helps the issuer in many ways.

Image Credit: Nick Youngson CC BY-SA 3.0 Alpha Stock Images

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