India’s transition toward a green economy necessitates innovative financial tools to bridge investment gaps in renewable energy and sustainability projects. Green bonds, introduced in India in 2015, have since gained momentum as an instrument aligning financial goals with environmental responsibility. This paper evaluates the comparative performance of green and conventional bonds issued by leading Indian corporations, examining financial metrics, investor perception, and environmental impact.

OBJECTIVES OF THE STUDY

1. To evaluate the financial performance of corporate green bonds issued by top Indian companies.
2. To assess the environmental impact of green bond-funded projects.
3. To compare the financial and strategic outcomes of green bonds versus conventional bonds in India.

This study adopts a descriptive and analytical approach, utilizing secondary data from company financial reports, bond prospectuses, SEBI filings, and credit rating agencies. A purposive sampling technique was used to select five prominent issuers with both green and conventional bond portfolios.

Data Sources:

• SEBI and RBI reports
• Company financial statements
• Credit rating reports
• Bloomberg, Economic Times
• Academic journals and policy papers

Key Metrics:

• Coupon rates, credit ratings, maturity periods
• Environmental outcomes (CO₂ reduction, renewable energy capacity)
• Financial ratios: ROA, ROE, Debt-to-Equity, CAR

DATA ANALYSIS & INTERPRETATION YES, BANK:

Introduction: YES BANK, one of India’s leading private sector banks, undertook multiple bond issuances between 2015 and 2017 to support its rapid expansion in retail and corporate lending. As part of its capital-raising strategy, the bank issued both green bonds to finance environmentally sustainable projects and conventional non-convertible debentures (NCDs) to strengthen its financial position and fund business growth. However, its aggressive lending practices and deteriorating asset quality led to severe financial distress by 2020, prompting regulatory intervention by the Reserve Bank of India (RBI). This case study analyzes the financial impact of these bond issuances, their alignment with corporate bond evaluation frameworks, and the lessons learned from Yes Bank’s financial crisis.

Comparison of Yes Bank’s Green Bond and Conventional Bond Issuances

Key Takeaways:

• Yes, Bank was the first Indian bank to issue Green Bonds, showcasing its leadership in sustainable finance.
• However, both Green Bonds and Conventional Bonds faced a similar fate due to the bank’s financial crisis, leading to a default rating (D) by 2020.
• Green Bonds had a positive environmental impact, while Conventional Bonds focused on business expansion but contributed to financial instability.
• Regulatory intervention in 2020 impacted both bondholders, reducing investor confidence in Yes Bank’s debt instruments.

L&T INFRASTRUCTURE FINANCE COMPANY LTD:

Introduction: L&T Infrastructure Finance Company Ltd (L&T Infra Finance), a subsidiary of L&T Finance Holdings, is a leading financial institution specializing in infrastructure project financing. To support its long-term funding requirements, the company issued both conventional and green bonds, playing a key role in India’s infrastructure and sustainability initiatives. In April 2016, L&T Infra Finance issued a conventional bond to finance various infrastructure projects, while in 2017, it issued a green bond to raise capital for renewable energy projects such as solar and wind energy. This case study evaluates the financial performance, impact, and strategic alignment of these bond issuances with corporate debt financing and sustainability objectives.

Comparison of L&T Infrastructure Finance Company Ltd's Green Bond and Conventional Bond Issuances

Key Takeaways:

• Green Bond Focus: Dedicated to financing renewable energy and climate-positive projects, backed by global investors.
• Conventional Bond Focus: Used for general infrastructure development, with domestic financial institutions as key investors.
• Credit & Market Confidence: Both bonds were well-received, maintained strong credit ratings, and ensured steady returns for investors.
• Environmental Impact: The green bond directly contributed to sustainability, while the conventional bond supported economic growth.

TATA CLEANTECH CAPITAL LIMITED

Introduction: Cleantech Capital Limited (TCCL) is a prominent financial services company in India, specializing in providing financing solutions for renewable energy, energy efficiency, and sustainable development projects. A part of the prestigious Tata Group, TCCL plays a crucial role in supporting the country’s transition to a low-carbon economy by facilitating investments in clean energy sectors such as solar, wind, and energy storage. The company also issues green bonds to raise capital specifically for projects that promote environmental sustainability, aligning with global climate goals. Through its innovative financial products, Tata Cleantech Capital is contributing to both economic growth and environmental preservation, making it a key player in India's green finance sector.

Comparison of Tata Cleantech Capital Limited Ltd's Green Bond and Conventional Bond Issuances

Key Takeaways:

• Issuer & Market Reception: Both bonds were issued by Tata Cleantech Capital, with the green bond attracting sustainable investors and the conventional bond attracting traditional fixed-income investors.
• Purpose & Use of Funds: The green bond funded renewable energy projects, while the conventional bond supported general business and energy-related projects.
• Financial Terms: The green bond had a lower coupon rate (8.74%), compared to the conventional bond’s (9.50%) higher rate.
• Environmental Impact & Reporting: The green bond tracked CO2 reduction and energy savings, while the conventional bond had no environmental reporting.
• Investor Appeal & Risk: The green bond appealed to investors seeking both financial returns and sustainability, with a moderate risk, while the conventional bond had a higher coupon rate but higher risk.
• Post-Issuance Impact: The green bond directly contributed to carbon reduction and clean energy, while the conventional bond had indirect environmental impact.

INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY LIMITED (IREDA)

Introduction: The Indian Renewable Energy Development Agency Limited (IREDA) is a leading public sector financial institution established by the Government of India under the Ministry of New and Renewable Energy (MNRE). Its primary objective is to promote, develop, and finance renewable energy projects across India. IREDA plays a vital role in the country’s transition to a sustainable energy future by providing financial support for various renewable energy sources, including solar, wind, small hydro, and biomass projects. The agency facilitates the growth of India’s clean energy sector by offering long-term financing solutions and technical assistance to developers, helping them implement renewable energy projects and achieve environmental sustainability goals. Through green bonds and other financial instruments, IREDA actively supports the nation's renewable energy expansion, contributing to carbon emission reduction and energy security.

Comparison of Indian Renewable Energy Development Agency Ltd's Green Bond and Conventional Bond Issuances

Key Takeaways:

• Green Bond Focus: Dedicated to financing renewable energy projects (wind, solar, small hydro), contributing directly to sustainability and carbon reduction.
• Conventional Bond Focus: Used for general corporate purposes, including renewable energy expansion, with a broad focus on infrastructure development.
• Investor Appeal: Green Bond attracts ESG-focused investors, while the Conventional Bond appeals to risk-averse investors seeking stable, fixed returns.
• Revenue and Profit Growth: Both bonds contributed to revenue and profit growth, with Green Bond generating ₹1,350 Crore in revenue and ₹320 Crore in net profit, while the Conventional Bond generated ₹1,450 Crore in revenue and ₹340 Crore in net profit.
• Renewable Energy Impact: The Green Bond directly expanded renewable energy capacity by 7,500 MW, while the Conventional Bond funded a total capacity of 8,000 MW, supporting broader renewable energy development.
• Financial Performance: Both bonds helped maintain strong credit ratings (BBB+), with minor differences in financial ratios—Green Bond had a debt-to-equity ratio of 1.8:1, and Conventional Bond had 1.7:1.
• Environmental and Economic Contribution: The Green Bond directly supports climate-positive projects, while the Conventional Bond drives economic growth and infrastructure development.

RENEW POWER

Introduction: ReNew Power, founded in 2011 by Sumant Sinha, is one of India's largest renewable energy companies. Headquartered in Gurugram, it develops and operates wind, solar, and hydro projects across multiple states. The company has played a key role in India's clean energy transition, backed by global investors. It actively raises funds through green bonds to expand capacity and reduce carbon emissions. With a strong market presence and commitment to sustainability, ReNew Power continues to drive India’s renewable energy growth.

Comparison of Renew Power’s Green Bond and Conventional Bond Issuances

Key Takeaways:

• Purpose & Utilization – Both bonds funded renewable energy expansion & debt refinancing.
• Financials – 2019 bond ($375M, 6.67% coupon, 5-year tenure) had lower risk; 2020 bond (₹373.8 Cr, 8.55% coupon, 1 yr 9 months) reflected higher credit risk.
• Investor Base & Credit Rating – 2019: Global investors (BBB- Fitch); 2020: Domestic & global investors (A+ CRISIL).
• Business Impact – Boosted revenue (20% YoY growth in 2019, 18% CAGR in 2020) and improved stock valuation.
• Sustainability – Added ~2,700 MW renewable capacity, reduced ~5.5M tons CO₂ annually, and created 9,000+ jobs.
• Debt & Market Performance – 2019 bond stabilized at 6.67%-7.1% yield, while 2020 yield remained higher (8.55%-8.75%).
• Market Perception – Strengthened ReNew Power’s reputation in sustainable finance, ensuring investor confidence.

FINDINGS

TOP PERFORMERS:

1. ReNew Power - Best Overall in Renewable Impact + Financial Growth

A leader in renewable energy, ReNew Power has reduced over 5.5 million tons of CO₂ and added ~2,700 MW capacity. It uses funds efficiently for growth and refinancing, showing strong financials with ~20% YoY growth in 2019 and 18% CAGR in 2020. Backed by global ESG investors and ICMA compliance, it enjoys strong investor confidence.

2. IREDA (Indian Renewable Energy Development Agency) – Strong Public Sector Performance

As a government-backed PSU, IREDA has funded ~15,500 MW (7,500 MW via green bonds). Green bond issuance improved its credit rating to BBB+ and lowered capital costs. Consistent profits (₹320–₹340 Cr) and strong policy support make it a public sector success in green finance.

3. Tata Cleantech Capital – Strong Sustainability Integration & Governance

Part of the Tata Group, it combines solid governance with clear sustainability goals. Its transparent reporting on CO₂ savings and green capacity builds trust among ESG and traditional investors. Strong post-issuance governance and stable demand support its position as a reliable green bond issuer.

MODERATE PERFORMER:

4. L&T Infrastructure Finance – Solid Performer, but Less Visible ESG Differentiation

With AAA/AA+ ratings, L&T has funded ~2,500 MW and cut 3.8 million tons of CO₂. While financially sound, it lacks strong ESG branding and visibility compared to leaders like ReNew or Tata Cleantech.

UNDERPERFORMER:

5. YES Bank – High Early Promise, but Collapsed Due to Mismanagement

Initially a green bond pioneer, YES Bank failed due to mismanagement and misuse of funds. It was downgraded to default by 2020, requiring RBI intervention. Its collapse damaged trust in its green finance credibility.

Cross-Company Insights & Trends:

• Financial Performance of Corporate Green Bonds:

Corporate green bonds in India show stable financial performance, drawing interest from both institutional and retail investors due to their sustainability focus. These bonds often offer slightly lower but competitive interest rates compared to conventional bonds. SEBI regulations and tax incentives have boosted their issuance. Issuing companies report improved investor trust, stronger balance sheets, and better brand image, with some seeing a rise in stock prices and market value.

• Environmental Impact of Green Bond-Funded Projects:

Green bonds have supported eco-friendly initiatives like solar and wind projects, leading to significant carbon emission cuts and job creation in renewable sectors. However, impact reporting varies—some firms provide detailed data, while others lack transparency. There’s growing pressure for standardized reporting to ensure accountability in environmental outcomes.

• Comparison with Conventional Corporate Bonds:

Green bonds tend to offer lower yields but more stability, whereas conventional bonds remain more liquid and preferred for short-term investing. Green bond issuance involves higher compliance costs due to certification and sustainability checks. Still, companies benefit through ESG investor access and improved reputation. With evolving regulations and awareness, green bonds are poised to rival conventional bonds more closely.

Corporate green bonds in India are both financially sound and vital for sustainable growth. Addressing issues like inconsistent reporting, higher issuance costs, and low liquidity is key to mainstream adoption. Standardized impact measures and improved market access will further boost their appeal.

This study faces several limitations: limited data availability, as green bonds are relatively new in India and disclosures on fund utilization are often insufficient; challenges in measuring environmental impact, since data is typically self-reported and lacks standardization; comparability issues with conventional bonds, due to differences in regulatory norms, investor incentives, and risk profiles; regulatory and policy influence, where frequent updates and government incentives affect financial outcomes; and sample size constraints, as the analysis is based on only five major issuers, limiting the generalizability of the findings.

The study highlights that corporate green bonds in India serve as a powerful tool for aligning financial performance with environmental responsibility. They offer competitive returns, diversify funding sources, and attract ESG-conscious investors, despite incurring higher issuance costs due to regulatory compliance and impact reporting. Compared to conventional bonds, green bonds provide strategic advantages such as broader investor access and enhanced market credibility, supporting long-term financial stability.

However, certain challenges remain, including higher coupon rates and evolving investor confidence due to the emerging nature of the market. The study concludes that green bonds are an effective mechanism for financing sustainability while maintaining financial viability. As interest in sustainable finance grows, the future of green bonds in India depends on stronger regulatory frameworks, improved transparency in impact measurement, and greater investor awareness, making them pivotal in India’s transition to a sustainable financial ecosystem.

RECOMMENDATIONS

• Enhancing Financial Viability: Companies should focus on improving the financial attractiveness of green bonds by offering competitive returns and ensuring transparency in reporting financial performance.
• Strengthening Regulatory Support: The Indian government and financial regulators should introduce more incentives, such as tax benefits and subsidies, to encourage corporate participation in green bond issuance.
• Improving Environmental Impact Assessment: Firms should implement standardized impact assessment frameworks to accurately measure and report the environmental benefits of green bond-funded projects.
• Increasing Investor Awareness: Companies and financial institutions should conduct investor awareness programs to promote green bonds as a viable investment option, emphasizing both financial returns and environmental benefits.
• Benchmarking Against Conventional Bonds: Regular performance comparisons between green bonds and conventional corporate bonds should be conducted to highlight the long-term benefits and address any existing performance gaps.
• Encouraging ESG Integration: Corporates should integrate Environmental, Social, and Governance (ESG) criteria more effectively into their business models to enhance investor confidence in green bonds.
• Expanding Market Participation: More companies, including mid-sized firms, should be encouraged to issue green bonds, thereby expanding the market and increasing capital flow toward sustainable projects.
• Transparency & Reporting Improvements: Issuers must enhance disclosure mechanisms by providing detailed reports on fund allocation, project impact, and financial performance to build investor trust and regulatory compliance.
• Developing Secondary Market Liquidity: The government and financial institutions should work towards improving the liquidity of green bonds in the secondary market to attract a broader base of investors.

FUTURE SCOPE

Future research can focus on a few key areas to build on the current study’s findings. Long-term performance analysis of green bonds can help assess their risk-adjusted returns and financial sustainability over time. Sector-specific evaluations across industries like renewable energy, infrastructure, and transportation can uncover unique challenges and effectiveness in deploying green finance. The impact of evolving regulatory and policy frameworks, including SEBI guidelines and government incentives, deserves attention for understanding market dynamics. Additionally, developing standardized impact measurement frameworks can enhance transparency and credibility in reporting environmental outcomes. Finally, exploring investor behavior and perception can provide insights into investment patterns and help identify barriers to wider green bond adoption.

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