Indian companies prepare for ESG bonds in their fundraising plans


The growing importance of ESG or environment, social and governance (in corporate boards) in India is now also reflected in India Inc’s capital raising plans, companies India having raised nearly $ 5 billion through ESG bonds so far in 2021, more than the amount raised in any of the previous years.

Indian companies raised $ 4.94 billion through ESG bonds, including green bonds, with the largest contribution coming from green bonds raised by renewable energy producers such as Greenko, ReNew Power and JSW Hydro Energy, according to data from the financial market tracker Refinitiv.

Companies that have tapped into the ESG bond market also include Shriram Transport Finance, which has raised funds through social bonds; Adani Electricity Mumbai Ltd and UltraTech Cement Ltd, which issued sustainability bonds (SLBs).

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“Over the past year, ESG has grown in importance and is no longer just a buzzword. Companies are assessed on compliance with ESG parameters and their sustainable development practices are monitored. All large companies take ESG seriously in all of their operations. There will be more bond offerings of this type given the attention ESG is getting from both investors and issuers, ”said Anuj Kapoor, Managing Director and Head of Bank of investment, UBS India.

Globally, too, ESG bond offerings have seen a surge as these concerns have taken center stage after the coronavirus outbreak.

The global issuance of green, social and sustainable bonds, collectively referred to as sustainable bonds, is expected to reach $ 850 billion in 2021, a new annual record and a 59% jump from 2020, Moody’s Investors Service said on Thursday in a report. report.

“After a record issuance in the first half of the year, we are now forecasting around $ 450 billion in green bonds and $ 200 billion each in social and sustainable bonds this year,” said Matthew Kuchtyak, assistant vice president and analyst at Moody’s.

“We still expect sustainable bonds to account for 8-10% of global debt issuance in 2021, as issuers in all market segments continue to explore how they can link their activity in capital markets to their sustainability goals, ”he said.

Global second-quarter sustainable bond issuance jumped 66% from a year earlier to $ 189 billion, Moody’s said. These were $ 94 billion in green bonds, $ 46 billion in social bonds and a quarterly record of sustainable bonds of $ 49 billion. The quarterly issuance total was the third highest on record, indicating that market momentum is still exceptionally strong, the rating agency said.

Industry experts believe that while there are not many price advantages for such bonds, as more and more dedicated pools of capital are being set up for ESG investments, an advantage in terms of price may appear for companies that follow the ESG path.

“Currently, there are not a lot of tariff advantages. In some cases, issuers may gain a very marginal advantage. This is mainly due to the fact that the investor pool for regular and ESG offers is not much different. But dedicated pools will become larger and the ESG allocation of large bond funds is expected to increase, which should allow for a more visible pricing advantage, ”Kapoor said.

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