Context
Under Swachh Bharat Mission-Urban, Ghaziabad issued India’s first Certified Green Municipal Bond, elevating ₹150 crore for a new Tertiary Sewage Treatment Plant (TSTP).
About Green Municipal Bonds
- Municipal Bond is a debt instrument issued by urban local bodies (ULBs) or municipal companies to finance infrastructure and public provider initiatives.
- The Green Municipal Bond is a subtype of municipal bonds used solely to fund environmentally sustainable and climate-resilient infrastructure initiatives, such as renewable energy, water remedy, and waste control.
- Article 243W of the Indian Constitution entrusts ULBs with functions like water supply, sanitation, and waste management—making them eligible to raise bonds.
Significance of GMBs
- Sustainable Development: Aligns with ESG (Environment, Social, Governance) making investment principles, now quintessential to many international investors’ methods.
- Low-Cost Capital: Offers cost-effective, long-term financing, regularly more low-priced than commercial bank loans.
- Broadened Investor Base: Attracts institutional and international investors, decreasing over-reliance on conventional domestic loans.
- Infrastructure Boost: Ideal for urban potential constructing in water remedy, sanitation, and waste management.
Challenges
- Limited Municipal Capacity: Many urban local bodies (ULBs) lack financial expertise and credit worthiness to difficulty bonds independently.
- Regulatory Hurdles: Complex approval approaches and restrained market intensity restrict quicker adoption of green bonds.
- Monitoring and Accountability: Ensuring obvious utilization of funds and environmental effect assessment remains difficult.
- Low Investor Awareness: Limited recognition amongst home buyers about green finance systems reduces demand.
Way Ahead
- Capacity Building: Strengthen ULBs through training in financial planning, ESG compliance, and challenge evaluation.
- Policy Incentives: Provide tax breaks, hazard ensures, and simplified frameworks to encourage green bond issuance.
- Robust Verification Mechanisms: Establish third-party certification systems for green credentials and effect monitoring.
- Expand Investor Outreach: Promote green bonds to pension funds, insurance companies, and ESG-focused traders.
- Integrate with National Missions: Align municipal green finance initiatives with AMRUT, Smart Cities, and Jal Jeevan Mission for synergy.
Source: The PIB
UPSC Mains Practice Question
Q. “Access to affordable, reliable, sustainable and modern energy is the sine qua non to achieve Sustainable Development Goals (SDGs)”.Comment on the progress made in India in this regard. (2018)
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