Climate change affects all of us. But it is expected to hit developing countries the hardest. The good news is that there are many solutions to address climate change, but they need financing.  Green bonds is one of the financing options available to private firms and public entities to support climate and environmental investments.  Investors are attracted to green bonds because they allow a closer connection to positive social and environmental impacts.

Green bonds raise funds for new and existing projects which deliver environmental benefits, and a more sustainable economy. ‘Green’ can include renewable energy, sustainable resource use, conservation, clean transportation and adaptation to climate change. Yes Bank & Export-Import Bank of India ( Exim Bank ) recently tasted success launching what are called ‘ Green bonds,’ a relatively new way to finance renewable energy projects.

A bond is a debt instrument with which an entity raises money from investors. The bond issuer gets capital while the investors receive fixed income in the form of interest. When the bond matures, the money is repaid. A green bond is very similar. The only difference is that the issuer of a green bond publicly states that capital is being raised to fund ‘green’ projects, which typically include those relating to renewable energy, emission reductions and so on.

Green bonds are issued by multilateral agencies such as the World Bank, corporations, government agencies and municipalities. Institutional investors and pension funds also have appetite for such bonds. For instance, investment funds BlackRock and PIMCO have specific mandates from their investors to invest only in bonds which fund green projects. The issuer provides periodic reports about the project.

Source: http://www.thehindu.com/business/what-are-green-bonds/article7070840.ece (accesed on 4/12/15)