Understanding the preference of individual retail investors on green bond in India: An empirical study

Dipen Paul,Dharmesh K. Mishra,Sushant Malik,Dhaval Prajapati

doi:10.21511/imfi.18(1).2021.15

Dipen Paul, Dharmesh K. Mishra + Show 2 more

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https://doi.org/10.21511/imfi.18(1).2021.15

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Abstract

The biggest challenge facing countries, including India, is creating and managing an LCR (low carbon resilient) economy, which balances the need for high growth rates and is environmentally sustainable. The green bond market provides investors the means to help change the economy into an LCR economy. The study was undertaken to understand the key drivers and the factors influencing the individual retail investor’s decision to invest in green bonds. A survey instrument was designed and administered through the snowball sampling technique to 125 Indian respondents of various age groups who were eligible to invest in the Indian bond market. SPSS software was used to conduct a descriptive analysis followed by regression and conjoint analyses. The study results suggest that the Environmental, Social, and Governance (ESG) rating and credit rating of the green bond issuers are the key factors that influence an individual’s investment decision. The findings also highlight that incentives such as tax exemptions and awareness of green bonds also affect an investor’s decision. This research stands out as one of the first attempts to understand the Indian retail investors’ perception of a green bond.

Highlights

In compliance with the United Nations Framework Convention on Climate Change (UNFCCC), known as the Paris Agreement, India intends to achieve by 2022 the capacity to generate 175 GW of renewable energy from non-conventional sources such as solar, wind, hydro, and bioenergy
The greatest challenge facing the world and India is the management of the transition towards the low carbon resilient (LCR) economy without affecting the rate and diversity of the growth
Around 81% of the investors preferred to invest in green bonds for the financial benefit, and 40% of the investors preferred to invest in the green bond market for the environmental benefit

Summary

Introduction

In compliance with the United Nations Framework Convention on Climate Change (UNFCCC), known as the Paris Agreement, India intends to achieve by 2022 the capacity to generate 175 GW of renewable energy from non-conventional sources such as solar, wind, hydro, and bioenergy. India is committed to reducing the intensity of greenhouse gas (GHG) emission by 33% to 35% below the 2005 level per unit GDP by 2030 and developing a carbon sink of 2.5-3 billion tons of CO2 equivalent (Government of India, 2015). To achieve these targets, India has to become a more climate-resilient economy, reduce the emission from waste, implement the Green India mission, increase afforestation, enclose the energy efficiency with the economy, and convince the people to help more in resisting climate change.

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