ESG-linked fund mop-up may surge to a record this year

ESG-linked fund mop-up may surge to a record this year

Indian companies are poised to set a record in raising funds with the ESG (environmental, social and governance) tag this year, as banks join the bandwagon ahead of the Reserve Bank of India (RBI) coming up with its own guidelines on ESG compliance. With the regulatory push set to accelerate after Prime Minister Narendra Modi declaring India’s ambition to be a carbon-free nation, bankers expect such overseas bond sales can go up to $10 billion this year and surge further in 2022.

Companies including

, JSW Hydro Energy, Axis Bank, , and Greenko have collectively raised $7.24 billion this calendar year so far through ESG-compliant papers, equivalent to two-thirds of what has been done in the past years, show data from Dealogic, Hong Kong.

“ESG-linked fundraising will surge to record levels this year onwards in India,” said Jayesh Mehta, India country treasurer, Bank of America. “Global investors are seeking green opportunities for fund deployment in India as the country holds big potential, especially in the renewable energy sector.”

With large conglomerates entering the clean energy space along with international private equity investors, India will chart a new path in producing clean energy, he said.

Any funds raised with ESG tag has to be deployed in dedicated pockets to remain compliant with the benchmark that lowers funding costs for borrowers.


“Investors want to distinguish themselves by supporting companies that are focused on pursuing the ESG agenda sincerely,” said Pramod Kumar, head of investment banking at Barclays Bank India.

“They have specific goals of deploying a certain proportion of their funds in ESG-compliant companies…”

ESG issuances will accelerate rapidly over the coming years, “which is positive for society, the investment community and the industry”, he said.

If both offshore bonds and loans are considered, the amount raised this year has again set a new record of about $9.7 billion, show a market estimate.

UltraTech Cement raised $400 million via sustainability-linked bonds in February. The move was interesting as cement companies are traditionally billed as emitters of pollutants.

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