Green Bonds

Green Bonds are tax-exempt bonds which are issued by qualified organizations and/or municipalities for the development of brown-field sites. Brownfield sites are areas of land that are under-utilized, have abandoned buildings, or are under developed. They often contain low levels of industrial pollution. Green Bonds are short-hand for Qualified Green Building and Sustainable Design Project Bonds. These bonds are created to encourage sustainability and the development of brown field sites. The tax-exempt status makes purchasing a green bond a more attractive investment when compared to a comparable taxable bond. Green bonds could, in fact, be all of the following: green gilts, green retail bonds and green investment bank bonds. But, there are many more being proposed as well, including: green infrastructure bonds, multilateral development bank green bonds, green corporate bonds, green sectorial bonds, rainforest bonds and index-linked carbon bonds. Green bonds have an important role in helping to raise finance for different parts our low-carbon transition.

India Allows Renewable Energy Certificates (REC) Trading:
India has also allowed trading of REC; it is one of the key growth drivers for the Renewable energy industry. As of now, the REC is traded in 2 of the major power exchanges: - Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL).

What is REC:
World over, Renewable energy is more expensive than traditional forms of energy and the growth of renewable energy has been supported mostly by governments through various policy initiatives like Feedin-
Tariffs, subsidies, tax concessions, among others. In order to make the renewable energy sector more sustainable, many countries like Australia, Japan, etc. have put in place a mechanism to trade the renewable energy on platforms similar to stock exchanges. The trade of the energy will be purely based on demand and supply and the only role the government plays is to mandate utility companies to buy a certain part of their power from renewable energy sources. Under the REC Mechanism, when Renewable Energy is generated (solar, wind, biomass, etc.), the energy is divided into two components – the physical commodity electricity and a tradable certificate, which is the Renewable Energy Certificate (REC).

Corporate Repo Bonds: 
Banks, corporate and primary dealers pledge corporate bonds with each other to raise short term money. It is similar to banks pledging government securities with the RBI to raise short term money. Unlike pledging of government securities, here the borrower who pledges corporate bonds does not receive the entire value of the bond. Allowing repo in corporate bonds enables mutual funds, insurance firms and non-banking finance firms to borrow money by offering corporate bonds as collateral. In India the RBI guidelines on repo in corporate debt securities came to effect on March 1, 2010. But till date the corporate repo bonds are not much active in India. Only five deals have been reported so far. Companies that have issues corporate bonds in India are REC, PFC, HDFC, and NHB. The corporate repo bonds in India has not grown much because of lenders or issuers maintaining a cautious approach as well as due to lack of proper trade guarantee mechanism.

Understanding Repos:
Repos, or repurchase agreements, are contract for the sale and repurchase of securities and treasury bills at a future date. In this transaction, the seller repurchases the financial asset at the same price at which it was sold, and pays interest on it. Essentially, repo is a short-term, interest-bearing loan against the collateral of securities.