India's green bonds find footing as stable 'greenium' underscores investor appetite

MUMBAI: Despite offering a small discount, India's sovereign green bonds have attracted growing investor appetite, according to market participants. In the fiscal half-year, the country sold 50 billion rupees ($524 million) of 30-year green bonds, resulting in an average premium of four basis points, the highest since sales began in the second half of fiscal 2023.

Green bonds, which finance environmentally sustainable projects, are considered to have a lower yield due to their environmentally friendly nature. Shobit Gupta, chief investment officer at Generali Central Life Insurance, explained that green bonds can be classified under the infrastructure category, which benefits insurance companies in terms of asset allocation and regulatory requirements.

So far, India has outstanding sovereign green bonds worth 877 billion rupees or $9.2 billion. The 30-year green bonds have been the most issued, surpassing the 500 billion rupee mark. Indian bonds have followed the gains made by U.S. Treasuries as oil prices dropped. Market participants are now calling for a larger supply of green bonds, as insurers manage a growing corpus and search for suitable substitutes.

Sachin Bajaj, chief investment officer at Axis Max Life Insurance, stated that the market is well-positioned to absorb a higher supply of green bonds in the second half of fiscal year 2027, especially if the issuance is focused on the longer end of the curve. The Indian government has been issuing 30-year green bonds consistently over the past three fiscal years, meeting investor demand.

Rahul Bhuskute, CIO at Bharti AXA Life Insurance, noted that long green bond issuance has remained steady, aligning with current investor demand.