IFC invests in L&T Infrastructure Finance via 1st Sebi-approved green bond

The International Finance Corporation (IFC), a member of the World Bank Group, has invested Rs 667 crore ($103 million) in L&T Infrastructure Finance Company Ltd by subscribing to the country's first official green bonds. This is in line with IFC’s strategy to support renewable energy infrastructure in the country and also develop the capital markets.

L&T Infrastructure Finance Company Limited, a wholly-owned subsidiary of L&T Finance Holdings Ltd, will use this money to give loans to solar power projects. The company has been increasing its focus on renewable energy, which has come to comprise 37 per cent of its Rs 22,774-crore (nearly $3.51 billion) total portfolio.

On May 30 this year, the Securities and Exchange Board of India (Sebi) came out with norms governing green bonds. Bonds whose proceeds are used for renewable energy, clean transport, sustainable water or land management, climate change adaptation, energy efficiency initiatives such as green buildings or biodiversity conservation projects or assets will qualify as 'green'.

In its statement, IFC said India needs $2.5 trillion to meet its climate change mitigation targets by 2030. The issue by L&T Infrastructure Finance to IFC qualifies as the first green bond approved by Sebi and may catalyse other similar programmes. IFC was one of the earliest issuers of green bonds, launching a green bond programme in 2010 to help unlock investments for private sector projects that support renewable energy and energy efficiency.

IFC, the private sector financing arm of the World Bank Group, helps the private sector address development challenges through investments, innovative financing, and advisory. IFC had earlier invested $50 million in Yes Bank and $75 million in PNB Housing Finance through instruments that would qualify as green bonds but they were floated before the Sebi circular of May 30.

"The partnership with IFC will further diversify our funding profile and demonstrates the strength of our project appraisal and risk assessment capabilities for renewable energy lending," said Virender Pankaj, chief executive officer, L&T Infrastructure Finance.

IFC said its contribution to India’s renewable energy sector accounts for 15 per cent of the incremental capacity since 2010. It invests in financial institutions that fund climate change projects as well as directly in projects and companies.

Along with the Tata Group, IFC has created the first private sector "Green Investment Bank" in India – Tata Cleantech Capital Limited – and given $170 million in wholesale investment to financial intermediaries that support the climate change programme in the country. In addition, IFC has invested about $1.2 billion in climate-friendly projects through direct investment in India in the past five years.

"This green bond subscription will serve as a catalyst for corporates to issue green bonds and provide the impetus for financiers to stay invested for a longer-term, which is essential for long-gestation, capital-intensive infrastructure projects," said Jun Zhang, Country Head for IFC in India.

LTFH is a financial holding company of Larsen & Toubro offering a range of financial products and services across rural, housing and wholesale finance sectors, as well as mutual fund products and wealth management services, through its wholly-owned subsidiaries, L&T Finance Ltd (erstwhile Family Credit Ltd), L&T Housing Finance Ltd, L&T Infrastructure Finance Company Ltd, L&T Investment Management Ltd, L&T Capital Markets Ltd, and L&T Financial Consultants Ltd.