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Prelims POWER PLAY- Economy-4


Green Bond

What Is a Green Bond?
A green bond is a bond specifically earmarked to be used for climate and environmental projects. These bonds are typically asset-linked and backed by the issuer's balance sheet, and are also referred to as climate bonds.

The World Bank is a major issuer of green bonds. World Bank green bonds finance projects around the world, such as India's Rampur Hydropower Project, which aims to provide low-carbon hydroelectric power to northern India's electricity grid.

Green bonds are designated bonds intended to encourage sustainability and to support climate-related or other types of special environmental projects. More specifically, green bonds finance projects aimed at energy efficiency, pollution prevention, sustainable agriculture, fishery and forestry, the protection of aquatic and terrestrial ecosystems, clean transportation, sustainable water management and the cultivation of environmentally friendly technologies.

Green bonds come with tax incentives such as tax exemption and tax credits, making them a more attractive investment compared to a comparable taxable bond. This provides a monetary incentive to tackle prominent social issues such as climate change and a movement to renewable sources of energy. To qualify for green bond status, they are often verified by a third party such as the Climate Bond Standard Board, which certifies that the bond will fund projects that include benefits to the environment.

Who can issue Green Bonds?
Ø Green Bonds are issued by multilateral agencies such as the World Bank, corporations, governmental agencies and municipalities

Green bonds are open for  investment by insurance companies, mutual fund companies, pension funds and the likes

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