Sustainable investment will be instrumental on the path to net zero. Green bonds are an important tool to facilitate sustainability projects by governments and businesses.
Green bonds are a form of debt financing for sustainability related projects. These bonds should clearly state their environmental objectives, from climate change mitigation to reducing pollution. Generally, companies and governments can borrow money at lower prices for these green projects. The difference between a conventional bond price and a green bond price is called the “greenium,” or green premium.
The World Bank has issued more than $14 billion in green bonds since 2008. These bonds have financed over a hundred projects in such areas as renewable energy, clean transportation, and agriculture. For example, a World Bank green bond financed Rampur Hydropower Project, which supported the partial transition of northern India’s grid to hydroelectric power.