Ghaziabad Nagar Nigam Launches India’s First Certified Green Municipal Bond

1. Ghaziabad Nagar Nigam has set a national precedent by issuing India’s first certified Green Municipal Bond (GMB).
2. The bond was floated under the Swachh Bharat Mission-Urban, aligning with sustainability goals.
3. It successfully raised ₹150 crore to finance a state-of-the-art Tertiary Sewage Treatment Plant (TSTP).
4. The TSTP aims to deliver high-quality treated water, making it viable for reuse in industrial operations.
5. This not only addresses urban sanitation but also promotes circular water economy in line with green urban development.

Implementation Model of the TSTP Project

1. The TSTP was constructed under the Public-Private Partnership Hybrid Annuity Model (PPP-HAM).
2. Under this model, 40% of the project cost was contributed by the Ghaziabad municipal body.
3. This reflects a progressive move to attract private expertise and funding in urban infrastructure.

What Are Green Municipal Bonds?

1. Municipal bonds are non-convertible debt instruments issued by local governing bodies or agencies empowered under Article 243W of the Constitution.
2. Green Bonds are a sub-category used to raise capital exclusively for eco-friendly, climate-resilient, and low-carbon infrastructure projects.
3. According to the World Bank, these bonds play a pivotal role in financing climate mitigation and adaptation initiatives.

Challenges in Issuing Green Municipal Bonds

1. Weak fiscal health remains a primary barrier, directly impacting a city's credit-worthiness and investor confidence.
2. Limited internal capacity within Urban Local Bodies (ULBs) impedes project planning, execution, and financial management.
3. ULBs often lack skilled professionals, technical know-how, and bond market familiarity, limiting their ability to raise capital efficiently.
4. There is a lack of organic demand for such bonds due to a narrow investor base and low financial transparency.
5. Issues like inadequate disclosures, irregular audits, and poor record-keeping further restrict ULBs’ bond eligibility.

Significance and Advantages of Green Municipal Bonds

1. GMBs support sustainable and climate-conscious urban development, aligning with global ESG investment principles.
2. Investors are increasingly integrating Environmental, Social, and Governance (ESG) metrics into their capital allocation decisions.
3. These bonds offer long-term, cost-effective capital, often cheaper than traditional commercial bank loans.
4. They also help ULBs diversify and expand their investor base, addressing the shortfall in conventional funding sources.
5. With domestic bank loans falling short of infrastructure demands, GMBs provide alternative and scalable financing avenues.

 

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