This is the first time the IFC, a member of the World Bank Group, has invested in an emerging markets green bond issue. The so-called "green masala bond" as IFC calls it, are for a tenor of ten years. The more than $49 million raised will contribute towards the establishment of a "platform for industry and other stakeholders for achieving 100GW of installed solar power capacity in India", says Yes Bank. The bank also takes pride in the fact that it is the first bank to have made a commitment towards the funding of 5,000MW of renewable energy projects by 2020 in India.
"Green bonds have opened a new finance flow that will be essential to confronting climate change impact," said Inessa Tolokonnikova, IFCs Financial Institutions Group Manager for South Asia. "IFCs investments in programs like Yes Banks green infrastructure bonds, will also encourage issuers in other markets to issue similar bonds and support greater resources for climate change finance."
On a global scale, green bonds issues amounted to almost $35 billion in 2014, while the market in India is still nascent. However with this breakthrough deal, Yes Bank hopes to catalyze the market for green infrastructure bonds in the country where investors can facilitate funding towards clean energy projects.
IFC sees Indian opportunity
The IFC has also crafted big plans for investment in India’s renewable energy sector. The non-subsidy driven approach in the country has attracted the corporation. The cost of renewable power has been sinking. Sujoy Bose, IFC’s global head of infrastructure and natural resources, added that the recently held competitive bidding for solar projects show that the sector has "lots of legs going forward and so the IFC expects to definitely continue to invest in India". The IFC has also withdrawn investment in coal-based projects, with Tata Power’s Mundra project being its last.