India's Green Bond Market Anchored by Sovereign Issuance Amid Modest Growth

India's sustainable bond issuance, already relatively small, declined to $2 billion in 2025. Green bonds still dominated volumes with a 62 per cent share. The remainder of issuance was of social bonds, said the S&P 'Global Sustainable Bonds Outlook Report'.

"Green labeled instruments could benefit from the country's climate goals. These will require annual investment of $250 billion until 2047, according to the Framework of India's Climate Finance Taxonomy," it mentioned.

Conversely, social bonds around themes of financial inclusion and women empowerment, for instance, are likely to remain niche. Investors see them as more complex.

The government has issued additional tranches of Indian rupee-denominated sovereign green bonds, reinforcing a domestic green yield curve, and attracting demand from institutional investors.

Sovereign issuances accounted for 94 per cent and 58 per cent of the country's green bond and overall sustainable bond market, respectively, in 2025.

Still, the Reserve Bank of India also faced challenges like a green bonds auction cancellation in June due to high yield demands.

India already met its target of 50 per cent installed renewable energy capacity in 2025, five years early.

"We expect stable to slightly rebounding issuance of $170 billion-$200 billion in 2026 in Asia-Pacific. Large maturities in 2026-2027, buoyant local-currency debt capital markets, and regulatory efforts will support issuance," said the report.

Economic uncertainty and evolving trade policies, fuelled by geopolitical tensions, are likely to weigh on issuance growth potential, the report added.

- IANS