MUMBAI: Bank of America-Merrill Lynch (BofA-ML) has set an ambitious $125-billion target of raising funds for financing environmentally friendly projects by 2025 through the sale of green bonds in the global market.
The bank sees India as a crucial market for these new instruments due to the demand for infrastructure projects like wind and solar power and electrically-powered mass transport systems, said Kaku Nakhate, country head (India) of BofA-ML.
Over the past two years, Indian companies have raised $6 billion through these instruments, led by Exim Bank, Axis BankBSE -0.48 % and wind and solar power company Renew Power. Nakhate said BofA-ML expects demand for green bonds to rise as more funds earmark a portion of their funds to specially invest in these instruments.
“Green financing is close to the heart of our CEO. We have taken the lead globally and were the first bank to underwrite a bond in the UK. We were also one of the first banks to raise money through a green bond in 2013. In India, we need more audit tracks for what assets are being financed for green bonds, to attract more resources,” Nakhate said.
Globally, large banks like HSBC, Citibank as well as investment managers like Black-Rock have set aside funds to invest in environmentally-friendly projects.
“BofA-ML expects $40 billion to be raised for environmentally friendly projects in the next five years, out of which $32 billion would be through bonds,” said Gaurav Singhal director, investment banking at BofA-ML.
“What this means is that the amount raised through these bonds will be five times the $6 billion so far raised by Indian companies since 2015,” Singhal said.
BofA-ML is also hopeful that the demand for such projects will rise because of the government’s smart city projects which envisages building infrastructure and enhancing technology in cities across India.
“The smart city project in itself is $80 billion and I think 75 per cent to 80 per cent of that amount has to be financed by debt. But we have to put in place auditing to ensure that we can track the end use of these funds. The world is moving to green financing and sustainability,” Nakhate said.