Green Term Loan

• 01 Oct 2021

Why in News

Recently, NTPC Renewable Energy (NTPC-REL), a subsidiary of NTPC, has signed its first Green Term Loan agreement for installation of Solar Projects in Rajasthan & Gujarat.

• NTPC-REL is also constructing India’s largest single local solar power park of 4.75 GW in Kutch.
• NTPC is taking various steps to make its energy portfolio greener by adding significant capacities of renewable energy sources.

Key Points

• About ‘Green Loan’:
  
  • A green loan is a form of financing that seeks to enable and empower businesses to finance projects which have a distinct environmental impact, or rather, which are directed towards financing ‘green projects’.
• Benefits of Green Loans:
  
  • Corporate Advantage:
    
    • It will help raise corporate value, by demonstrating that they are actively promoting Green Projects by procuring Green Loans, which could possibly earn them public acceptance.
    • This will also help in fulling Corporate Social Responsibility targets.
  • Balancing Economy With Ecology:
    
    • By providing Green Loans, lenders can support the realization of the environmental benefits that contribute to creating a sustainable society, while simultaneously gaining returns on their lending.
    • An increase in Green Loans and Green Deposits will enhance individual awareness of Green Loans.
  • Environmental Benefits:
    
    • An increase in Green Loans is expected to increase private funds in Green Projects, contributing to the substantial reduction of GHG (GreenHouse Gas) emissions and the prevention of degradation of natural capital.
    • The promotion of Green Projects can lower energy costs, strengthen energy security, revitalize the regional economy, and enhance resilience in the event of disasters.

Other Related Concepts

• Green Bonds: A green bond is a debt instrument with which capital is being raised to fund ‘green’ projects, which typically include those relating to renewable energy, clean transportation, sustainable water management etc.
• ESG Fund: ESG Fund is a combination of three words i.e. environment, social and governance. It is a kind of mutual fund.
  
  • Its investing is used synonymously with sustainable investing or socially responsible investing.

Source: PIB