The Collapse of the Greenium: Evidence from India's Nascent Sovereign Green Bond Market
DOI:
https://doi.org/10.66635/f0by2j41Keywords:
Sovereign Green Bonds, Green Finance, Greenium, Climate Finance, Viksit Bharat, ESGAbstract
India’s entry into sovereign green finance in January 2023 marked a historic watershed in the nation’s climate finance architecture. The Sovereign Green Bond (SGB) programme, with a cumulative issuance potential of Rs. 53,000 crore and an annual target of Rs. 15,000–20,000 crore, channels capital into green infrastructure investments aligned with India’s Nationally Determined Contributions (NDCs) and its net-zero by 2070 commitment. Situated within the developmental ambition of the Viksit Bharat initiative, this paper undertakes a systematic early assessment of the programme through descriptive analysis, comparative benchmarking against established sovereign green bond issuers, and SWOT analysis. Specifically, the study examines the programme’s legal and institutional framework, the sectoral allocation of proceeds, and the empirical behaviour of the ‘greenium’ - the yield premium that green bonds command over equivalent conventional sovereign securities. Drawing on primary market auction data (FY2023–FY2025), an OLS regression model is estimated to identify the determinants of greenium across eleven completed auctions. The analysis finds that while the programme has successfully established an ICMA-aligned framework and garnered institutional credibility, it is constrained by a structurally thin greenium of 2–3 basis points (well below the global average of 7–8 bps), the absence of mandatory third-party verification, insufficient proceeds additionality discipline, and shallow secondary market liquidity. The paper advances seven policy recommendations to strengthen the programme’s integrity and scalability.
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