YES Bank, the finance institution behind India’s first green bond that raised $180m earlier this year, will be launching a second issue towards the end of the month, and is planning a portfolio of ESG bonds including an affordable housing bond and a smart city bond.
Speaking to Responsible Investor, Rana Kapoor, founder & CEO of YES Bank, said his organisation, India’s fourth largest private sector bank, “loved the product” and would be increasing its activity in the area of social and green bonds.
YES Bank’s inaugural green bond was launched in February at India’s first renewable energy expo Renewable Energy Global Investors Meet (RE-Invest), organised by the India government and hosted by Prime Minister Narendra Modi.
It is a 10-year, rupee-denominated bond and KPMG will assure it. Proceeds from the bond will be used to finance renewable energy projects in solar, wind, hydropower and biomass. It raised $180m and was launched in line with the Green Bond Principles.
Investors into the bond are mainly domestic institutional investors, except for one foreign player.
Buoyed by the success of the fund, Kapoor told RI at a meeting in London to launch the Global Investors’ India Forum that a second issue was planned for the end of July.
He added that there would be more ESG bond products. “This has encouraged us to do product innovation. We hope to soon launch an affordable housing bond to reduce the cost of capital to create affordable homes. Also we are looking at smart city bonds.”
The Modi government has announced a number of policies in this area, including Housing for All by 2022 which is targeting 20m homes for the urban poor by 2022 and the ‘smart cities’ mission aiming to raise $79m for infrastructure development.YES Bank’s foray into the green bond market also ties in with Modi’s policies on renewable energy: the government has set a huge target of 165GW of new renewables by 2022 and wants private capital to finance the rollout.
Sanjay Mandavkar, a senior director at YES Bank, estimates that $100bn in capital will be required to meet the target. YES Bank’s current green bond commits to debt financing 5GW.
A key issue here is regulation. Currently there are no official guidelines on issuing offshore bonds and most institutions in India are not allowed to issue them.
The Reserve Bank of India, the central bank, is currently consulting on liberalising the general bond market to allow institutions to issue offshore bonds.
YES Bank says it is getting a lot of queries from overseas investors and hopes to explore the possibility of offshore bonds once there are clear guidelines.
Apart from YES Bank’s issue, the other Indian green bond is a five-year, $500m dollar-denominated bond from Export Import Bank of India (EXIM).
The latter was the first US-denominated green bond from India and raised proceeds from fund managers, banks, sovereign wealth funds and insurance companies.
YES Bank was founded by Kapoor in 2004 and from inception had a focus on sustainability; it’s a signatory to the CDP, Natural Capital Declaration and the UN Environment Programme Finance Initiative.
Kapoor said a “tectonic shift” was happening in the country and that Modi had created confidence. “Solar power is being unleashed in India. It will be a game changer in our country and will be a fantastic opportunity in India.” He added that pension funds were recognising what was happening in the country. Link to YES Bank’s Sustainability Report.