The Economic Survey of Karnataka 2021-22 has laid great emphasis on green bonds. The report suggests that the state government can explore resource mobilisation in green bonds for strategic finance/refinance in many areas for the immediate consumption as well as long term needs.
The areas include e-mobility, waste management, micro irrigation (IoT based), solar irrigation, compulsory subsurface irrigation for sugarcane for converting flooded sugarcane to drip irrigation, disaster management and agroforestry which would not only help in greening the urban landscape but also provide livelihood opportunities.
Recognising the challenges emerging owing to climate change globally, the report stated that the investors have increasingly become aware of the risks of climate change to their portfolios.
“Reporting of climate risks has increased through mechanisms such as the Task Force on Climate-related Financial Disclosures (TCFD). Investment Community is being pressurised by stakeholders to employ efficient environmental, social, and governance (ESG) policies. Green bonds address some of these changes to the new scenario by offering investors a platform to engage in good practices, influencing the business strategy of bond issuers,” the report read.
The Union Budget last month also made a proposal to issue sovereign green bonds as a part of the government’s overall market borrowings. A green bond is a debt instrument whose proceeds will be earmarked for financing climate and environment projects.
“Karnataka has a very responsive administration, skill, potential and requirement to harness the true essence of Green Bonds. There are many Public Sector Enterprises, Government Boards and Corporations which are in a position to attract investment through the Green Bond. Apart from Institutional Investors, Green bonds would find a synergy with Non-Resident Indians / Kannadigas, High Networth Individuals, Civil Society organizations and the citizens of the state,” the report said.
An Indian Brand Equity Foundation (IBEF) report states that the cumulative FDI inflow in Karnataka reached US$ 20.41 billion, the third highest in India, after Gujarat and Maharashtra in the period between October 2019 and June 2021.
“The issuer which is the state government can benefit immensely from International Capital Market Association (ICMA) Green Bond Principles (GBP). These principles call for a high degree of transparency and disclosure in order to promote integrity in the green bond market. GBPs require that the proceeds from the green bonds be used in green projects having clear environmental benefits that can be assessed (and quantified, if possible), by the issuer,” the report said.
It added, “This means that the issuer should adopt a rigorous process to evaluate and select projects and must convey to the investors how the projects are chosen and how the project’s goals align with the environmental sustainability objectives. This will provide the requisite changes to ensure sustainable governance. Also, the proceeds should further be tracked in an appropriate manner by the issuer (Government of Karnataka to ensure that they are being managed appropriately towards the furtherance of the designated green project. Lastly, the issuers must keep up-to-date information on the use of proceeds, which should be regularly updated until the project is completed.”
In June 2009, the state government constituted a Coordination Committee to oversee and coordinate the state’s response to climate change. Environmental Management and Policy Research Institute (EMPRI) was mandated to prepare the State Action Plan on Climate Change (SAPCC). EMPRI along with The Energy and Resources India (TERI) tabled the first report in 2013-14. The second edition of SAPCC estimates the budget allocation of Rs 53,000 crore till 2030 on direct climate related issues.
The Economic Survey is published every year by the state government with an objective of assessing and evaluating the performance of the state across sectors and to identify specific gaps and challenges for initiating appropriate action.