Zurich-based responsAbility AG, a leading asset manager for impact investments in emerging economies, has inked an agreement with Pune-based non-banking financial company (NBFC) Electronica Finance Limited (EFL) for the issuance of green masala bonds for its climate fund.
EFL has issued rupee-denominated senior secured bonds equivalent to $10 million, dedicated to expanding their energy-efficient machinery lending portfolio for small and medium enterprises (SMEs) operating in the carbon-intensive manufacturing sector, a press release from the company informed.
EFL has $180 million of assets under management, while responsibility AG, an asset manager for impact investments in emerging economies, manages $3 billion of assets through a variety of investment vehicles that provide private debt and equity to 540 companies with inclusive business models across 90 countries.
The release further informed that the Indian SME sector currently contributes 45% to the country’s total greenhouse gas emissions from the manufacturing industries and is widely suffering from obsolete technology and lack of funding.
EFL has experience in the green lending sector, having associated with Small Industries Development Bank of India (SIDBI) to initiate loans to finance energy-efficient machines for over a decade. Through this green bond issuance, advised by Deloitte, the company seeks to further expand its technologically advanced, energy-saving machine finance portfolio, the release informed.
“By enabling Indian SMEs to improve their energy efficiency and processes we will further support them in making them competitive and our economy more sustainable and resilient,” Shilpa Pophale, Managing Director of EFL, said.
The partners have agreed on a multi-phase plan for both short-term and medium-term green lending development. Leveraging on responsAbility’s ample international experience and the fund’s technical advisory support, EFL plans to diversify its product offering and to expand into financing solar PV for the commercial and industrial markets, while responsAbility expects to gain from the experience EFL has in financing machines for SME borrowers for more than two decades, the release added.
“Partnering with EFL, which is well established as a lender to the MSME segment to expand their energy efficiency lending portfolio, will allow us to integrate green lending into this sector and, as a result, sustainably reduce CO2 emissions,”Jaskirat Chadha Principal, Financial Institutions Debt – Asia-Pacific for responsAbility was quoted saying.
Back in 2017, the Indian Renewable Energy Development Agency (IREDA) had raised $300 million (~₹19.5 billion) through the issuance of Green Masala Bonds on the Singapore Exchange (SGX). The agency issued a five-year green rupee-denominated bond, offering an annualized coupon rate of 7.125 percent.
Later in the same year, the Indian Railways Finance Corporation (IRFC) also raised $500 million (~₹32.07 billion) through the issuance of its first green bond on the London Stock Exchange’s new international securities market. The bond was oversubscribed by more than three times, indicating strong support from global investors.
In December 2017, the Power Finance Corporation, an undertaking of the government of India, also issued green bonds worth $400 million (~₹25.72 billion).