IFC, a member of the World Bank Group, has invested INR 6.67 billion ($103 million) in L&T Infrastructure Finance Company Ltd. by subscribing to the first official Green Bonds in India. This is in line with IFC’s strategy to support renewable energy infrastructure in the country and also develop the capital markets.
L&T Infrastructure Finance Company Limited, a wholly-owned subsidiary of L&T Finance Holdings Ltd., will use this money to give loans to solar power projects. The Company has been increasing its focus on renewable energy, which has come to comprise 37 percent of its total portfolio of INR 22,774 crore (nearly $3.51 billion).
On May 30 this year, the Securities and Exchange Board of India came out with norms governing Green Bonds. Those bonds would qualify as Green whose proceeds are used for projects or assets of renewable energy, clean transport, sustainable water or land management, climate change adaptation, energy efficiency such as green buildings or biodiversity conservation.
India needs $2.5 trillion to meet its climate change mitigation targets by 2030. The issue by L&T Infrastructure Finance to IFC qualifies as the first Green Bond approved by SEBI, and may catalyze other similar programs. IFC was one of the earliest issuers of green bonds, launching a green bond program in 2010 to help unlock investments for private sector projects that support renewable energy and energy efficiency.
IFC, the private sector financing arm of the World Bank Group helps private sector address development challenges through investments, innovative financing, and advisory. IFC, had earlier invested $50 million in Yes Bank and $75 million in PNB Housing Finance through instruments that would qualify as Green Bonds but were floated before the SEBI circular of May 30.
“We are delighted to partner with IFC that has been a pioneer in the Indian and global green bond market and climate financing,” said Virender Pankaj, Chief Executive, L&T Infrastructure Finance. “This partnership with IFC will further diversify our funding profile and demonstrates the strength of our project appraisal and risk assessment capabilities for renewable energy lending.”
IFC’s contribution to India’s renewable energy sector accounts for 15 percent of the incremental capacity since 2010. It invests in financial institutions that fund climate change projects as well as directly in projects and companies.
IFC has, with the Tata Group, created the first private sector “Green Investment Bank” in India - Tata Cleantech Capital Limited -- and given $170 million in wholesale investments to financial intermediaries that support the climate change program in the country. In addition, IFC has invested about $1.2 billion in climate-friendly projects through direct investments in India, in the last five years.
“L&T Infrastructure Finance is a leading financier to the renewable energy sector and this green bond subscription will serve as a catalyst for corporates to issue green bonds and provide the impetus for financiers to stay invested for a longer-term, which is essential for long-gestation, capital intensive infrastructure projects,” said Jun Zhang, Country Head for IFC in India.
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