Implementation and sustainability of ESG bonds in India

Abstract

Environmental, Social, and Governance (ESG) bonds have been increasingly popular in recent years. The most common type of bond is green bonds. The largest issuers in this category are renewable energy firms. While there is strong worldwide demand for these bonds, there is a large demand gap in the Indian markets. The . imal presence of ESG bonds in the local market (India) is a direct result of the poor state of the cQrpprate bond market in india. The indian CQfPQrate bond market is nowhere close to the success or scale of the equity markets. Demand side challenges like lack of liquidity, uncompetitive returns, lack of diversity, information asymmetry, etc. have contributed to the struggle on Indian Corporate Bond market. Additionally, issuers are not seeing any clear pricing benefit yet in ESG bonds, due to weak demand. Harmonisation of various regulations will have to take place in order to make ESG investing attractive. Health of the corporate bond market as a whole must improve to make ESG bonds mainstream in the Indian capital market.