The purpose of green bonds is thematic. It is the transparency, accountability and integrity of the use of proceeds

Climate bonds, one of the instruments which promote green investment are also surrounded by certain challenges. Various companies fail to achieve targets of decarbonisation which further impacts investors’ perception of the company’s commitment to energy transition. Additionally, it also raises climate-related credit risks and leads to wider bond spread and increased capital costs.

“For any kind of market to grow, integrity has to be at the centre. The purpose of green bonds is thematic. It is the transparency, accountability and integrity of the use of proceeds. Whereas, Sustainability linked bonds (SLBs) serve a general purpose which gives the flexibility to invest in different processes depending upon a predetermined target,” said Neha Kumar, Head, of South Asia, Climate Bonds Initiative.

While addressing the question by Chandni Khosla, Board Advisor, Sustainability and Sustainable Finance during the BW Planet Pulse Conclave, Kumar said, there are no penalties in India due to failure to achieve targets because there are no criteria to measure it. Among all the SLBs in the world, only 16 per cent of them were found to be allied with the targets.

Santhosh Muzumdar, Director of Government Relations and Sustainability, Johnson Controls said, “To reduce electricity cost investment in higher efficient equipment is required. Hence, we provide our partners with the necessary equipment and urge them to declare their energy goals publicly and we put some mechanisms to measure improvements.”

“We fund projects and if we do responsible financing the world can be a better place. Responsible financing is crucial, if you look at the construction industry, there are opportunities to improve water usage. We ensure that we encourage biodiversity and the environment at large for the good of society,” Sridhar Sarathy, Chief Ethics Officer and Head of sustainability and CSR, at TataCapital.

Prithviraj Franklin A, Director, Sustainability and CSR, Happiest Minds committed that they will be carbon neutral by 2030. He also said, “We have the advantage of being a service-oriented firm, hence we have imbibed sustainability with a technological perspective. We are seeking sustainable technology like low code technology and how our applications reduce consumption.”