Introduction: The Vadodara Municipal Corporation (VMC), in a landmark move within the Asian markets, has successfully raised Rs 100 crore (approximately USD 12.07 million) through the issuance of the first certified green municipal bond in Asia. This initiative is aimed at funding sustainable water infrastructure projects in Vadodara, Gujarat.
Bond Issue Details:
- Coupon Rate: The bond features a semi-annual coupon rate of 7.90%.
- Market Reception: Initially opened for bidding on the Bombay Stock Exchange’s Electronic Bidding Platform (EBP), this is Vadodara’s second bond issue following a highly successful first issue that was oversubscribed by 10 times.
- Credit Rating: The bonds have been rated ‘AA+ STABLE’ by India Ratings.
- Certification: They have also earned a green security certificate from the Climate Bonds Initiative, emphasizing their compliance with international green bond criteria.
Use of Proceeds:
- Project Focus: The funds accrued from the bond issue will be utilized predominantly for the development and enhancement of liquid wastewater management systems across Vadodara. This includes the collection, treatment, and reuse of sewage water, aimed at improving both air and water quality.
- Sustainable Impact: These projects are critical in promoting sustainable urban development and aligning with global environmental goals, including those set forth in the Paris Agreement.
Global Collaboration and Financial Arrangement:
- International Support: The bond issue was assisted by officials from the U.S. Treasury Department, providing technical aid and underscoring the global importance of the initiative.
- Financial Arrangers: SBI Capital Markets and Tipsons Consultancy Services were the arrangers for this green bond issue.
Significance of the Green Bond: A green municipal bond like the one issued by VMC represents a debt security that is not only sustainable but also socially responsible, focusing on funding projects that have a positive impact on the environment. This bond is specifically designed to facilitate significant enhancements in the management of liquid wastewater in Vadodara, fostering sustainable urban growth and ecological resilience.
Conclusion: This pioneering financial venture by the Vadodara Municipal Corporation sets a new benchmark in green finance in Asia. By channeling funds into crucial wastewater management infrastructure, VMC not only supports Vadodara’s urban development but also contributes to broader environmental conservation efforts, setting a precedent for future green municipal bonds in the region.
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