India issued its first Sovereign Green Bond in January 2023, raising ₹8,000 crore through two tranches of 5-year and 10-year bonds. These bonds finance projects in renewable energy, clean transportation, energy efficiency, and sustainable water management. The framework, approved by the Cabinet in 2022, follows international standards including Green Bond Principles and Climate Bonds Standard. Proceeds are allocated through a Green Finance Working Committee. Globally, over $500 billion in green bonds were issued in 2022, with India joining 20+ sovereign issuers including Germany, France, and Chile in this sustainable finance market.

Sovereign Green Bonds represent India's formal entry into sustainable finance, addressing both fiscal needs and climate commitments. Unlike corporate green bonds, these carry sovereign guarantee, offering lower borrowing costs for green projects. The framework mandates allocation to four eligible categories: renewable energy (solar, wind), clean transportation (electric vehicles, metro), energy efficiency (smart grids, LED), and sustainable water management. A Green Finance Working Committee oversees fund allocation, while impact reporting ensures transparency. This mechanism helps India mobilize international capital for its $4 trillion green transition needs by 2030. Globally, sovereign green bonds have lower yields than conventional bonds, reflecting investor preference for ESG-compliant securities. Countries like Germany pioneered this in 2020, while emerging markets like Chile and Nigeria followed. India's framework aligns with international standards, making it attractive to global institutional investors who manage $30 trillion ESG assets. The bonds also support India's NDC commitments under Paris Agreement, creating a direct link between fiscal policy and climate action. Success here could pave way for other sustainable finance instruments like blue bonds and transition bonds.