E-INVESTING
Business Today|May 30, 2021
Institutional investors, who always focussed on G (governance), are now increasingly engaging with investee companies on the E (environment) and the S (social) part
ANAND ADHIKARI

THE BIG CHALLENGES

Awareness on E is lacking

Hedging risk for raising foreign currency bonds

Not many ESG-compliant companies

Regulatory framework is still evolving

Green washing (money going to projects not certified green)

Reporting and compliance challenges, companies not disclosing much

In March, Hero Future Energies, the renewable energy venture of the Hero Group, received an overwhelming response for its overseas green bonds with investors pouring in over $3 billion for expansion of its renewable energy portfolio abroad as well as in domestic market. The six-year maturity money was raised from insurers and institutional funds at a coupon rate of 4.25 per cent.

Another renewable energy company, Hyderabad-based Greenko Energy Holdings, mobilised close to a billion dollars through green bonds for refinancing its debt. Though renewable players are finding acceptance amongst global investors, Indian issuers are a bit slow in tapping the huge global pool of green investors.

In fact, large institutional investors like sovereign and pension funds investing or present in Indian listed companies, are taking up the ESG (Environment, Social, and Governance) agenda very seriously. The Indian journey of raising money from green investors is very new. Some six years ago, the Export-Import Bank of India (EXIM Bank), the premier export finance institution, was the first institution from India to test the global market for raising India’s first foreign currency green bond offering. Today, the corporate sector, mutual fund industry, private equity, and venture capital all have some plans to tap the green market and make efforts to help companies build a sustainable business model.

Barely Scratching the Surface

Data for the last 6-7 years shows India has barely scratched the surface. Corporates and institutions like Indian Railway Finance Corporation, SBI, Renewable Energy Development Corporation, EXIM Bank Renew, CLP Wind Farms, etc. have mobilised close to $10 billion whereas a mere $1.45 billion has been outstanding on rupee-denominated green loans. Global data shows that there are about $1 trillion of green bonds outstanding as of March 31, 2020.

“This market has been growing at a remarkable rate. India has not tapped the green bond market fully,” says David Rasquinha, Managing Director and Chief Executive Officer of EXIM Bank, the largest issuer of foreign currency bonds from India.

“In the last 3-4 years, from the Indian perspective, pension and sovereign funds have always wanted a very clear articulation of what is the É strategy of the investee company. And many are saying that even on existing investee companies, they want a clear strategy. ‘E’ has become a value enabler,” says Sanjeev Krishan, Chairman, PwC in India. PwC on its part is focussing extensively on ESG reporting, strategy and transformation.

Typically, there are very few pure green investors globally, but big investors with global operations have green divisions. “Most of the green bond offerings (nearly 40 per cent) is taking place in Euros followed by the US, China, and other countries. There is great interest in Europe on green. Perhaps, they are leading the way when it comes to green outcomes,” says Rasquinha of EXIM Bank. “Internationally, there are a lot of funds chasing active cleantech,” agrees Manish Chourasia, MD, Tata Cleantech Capital Limited. There are multilateral institutions and climate investors who have a mandate to invest in green. There are many companies in the clean energy space raising funds directly in the overseas market.

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