Over the past few months we’ve got to know the work of the IDBI, an Indian development bank. It used to be called the Industrial Development Bank of India, a name that explained them well.
Like a lot of India’s banks they’ve taken up Prime Minister Modi’s mission to grow clean energy and green infrastructure.
Modi’s mission is not about just solar, where the government multiplied by tenfold the previous government’s development target; India is now planning to build a massive 175 GWh of renewables by 2025! Go!
It’s also rail: Indian Railways have a target of increasing the national share of freight carried by rail from 32% to 50% - and that’s while the economy grows at a clip 7-8% a year. That’s what you call “shifting freight to low-carbon transport”. Plus they have a vast rail electrification taking shape across their 17,000 kms of track; plus vast modernization of rolling stock.
They’ve even set up a special agency that has the task of covering 7,000 railway stations across India — and the land around them — in solar panels. Brilliant!
And then there’s the clean water developments. The Ganges must be one of the more polluted rivers in the world; they’re looking to change that with new waste water treatment systems and at the same time build water storage capacity that will help ride out the increasing volatility of rainfall, as a result of climate change impacts. Mind you, if you’ve ever been caught in the first downpour of the monsoon in Delhi it’s hard to imagine anything more wildly violent; but what we’re talking about is the increased likelihood of occasional failures of the monsoon, putting at risk the livelihoods and lives of hundreds of millions of people. This is the hard edge of climate change adaptation.
Those water plans are still in development; that will be next year’s investment tsunami story, hopefully replete with the sorts of water infrastructure planning frameworks we outline in the Climate Bond Standards eligibility criteria for water investments, being published later today. Be sure to ask.
In the meantime the IDBI has been ramping up it’s lending in green infrastructure - but not just for the big stuff. They’re also supporting distributed generation: for example, they’re providing the capital for Maharashtra State’s roll-out of loans for solar irrigation pumps for hundreds of thousands of farmers. This would give those farmers reliable power for irrigation that will help them increase yields, and avoid them having to use polluting diesel generators and fuel that keeps unpredictably going up and down in price.
Today IDBI go to market with their first green bond, joining pioneer Indian issuers Yes Bank, Exim Bank and CLP. IDBI are aiming for a USD Benchmark - that means big.
It’s what you might call a ‘potpourri’ bond, like a lot of development banks, built around a mixed pool of assets. In this case they’re allocating proceeds to:
1. An existing pool of loans to:
- solar and wind energy
- hydropower (run of the river and less than 15MWh
- waste-to-energy plants
- biomass-to-energy, using agricultural waste and certified feedstocks
- grid lines that connect renewable energy
2. New loans to renewable energy they will be making over the coming 12 months.
They’ve requested Climate Bonds Certification; but Approved Climate Bond Standards Verifiers are not in a position to do that yet, at least not until the Climate Bond Standards eligibility criteria for some of those assets are published, starting in January.
However, they want to get a bond out to mark the UN Climate Change Conference next week.
So they’re going to prospective investors stating that their bond is “aligned with the Climate Bonds Taxonomy” (a phrase NRW Bank and Verbund used with their green bonds) and a stated commitment to seek post-issuance certification under the Climate Bonds Standards in January, once further criteria are published. That would make it India's first Certifed Climate Bond.
From the documents they’ve provided it looks like they’ll be fine, although of course there is some risk: a bond is not certified until it’s certified, with all the examination that requires. To mitigate any risk they’re saying they’ll work with a verifier to make changes if required to make sure they fully comply. That’s good news.
IDBI are what you call a ‘blue-chip’ institution; so we’re pretty confident they will want to get it right. They've just become a Climate Bonds Partner to underline their promise. We’ll report again as soon as they get their certification sorted out.
In the meantime, we welcome IDBI to the green bonds market and are cheering them on very loudly this week.
IDBI are not the only ones; there’s a revolution taking place in India.
Even the National Thermal Power Company (NTPC), the state entity responsible for a huge slice of the country’s coal-fired power generation, has been told they have to build 10 GWh of solar. You heard that right – that must be one of the largest solar mandates of any single entity in the world, and surely the largest outside of China. What we especially love about this is that they’ll be using a balance sheet made up of fossil fuel power assets to finance the growth of solar. Yes!
And yes, you can expect some green bonds from NTPC in the coming year.
There’s a long way to go in India before all this planning comes to fruition, and there are still a lot of coal-fired power plants we have to figure out how to close down. But the ambition for change is what we need to see around the world; not just in Mexico, Egypt and Turkey, but in the dirtier developed economies of Poland, Korea and Australia.
Bravo India, and Bravo IDBI.
