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INNOVATIVE FINANCING MECHANISMS

Innovation opens doors to new opportunities for sustainable financing  

Innovative Financing Mechanisms

In context of green financing, Innovative Financing Mechanisms may be understood as contemporary methods to raise funds for supporting green projects. YES BANK has always been innovative in the way it has raised capital for funding some important green projects and for contributing towards India’s commitment to climate action. The bank has made pioneering efforts to mainstream financing to sustainability sectors through the following innovative mechanisms:

 

Blended Finance to enable high impact/ transformational projects

YES BANK in partnership with an NGO and a specialized rural bank are undertaking a transformational blended finance pilot project to demonstrate how innovative structures can be leveraged towards facilitating mainstream finance for inclusion and scale.

This pilot project is towards promoting livelihood security, of 600 underprivileged women salt farmers by replacing diesel pumps with solar pumps for salt production in the Little Rann of Kutch. The endeavor is intended to achieve the following outcomes:

  • Enable savings of the salt farmers, and channelize these savings towards building long-term income generating assets, thus contributing to eradicating extreme poverty
  • Promote gender empowerment
  • Ensure environmental sustainability
  • Build a financial structure that can progressively facilitate an economically and environ-mentally sustainable social business project

 

Green Bonds

Given the Government of India’s focus on increasing renewable energy capacity to 175 GW by 2022, it is estimated that this sector would require significant financing. Therefore, there was a need to evolve innovative instruments to finance projects in renewable energy, and green infrastructure bonds seemed to be one such specialized avenue that could allow finances to flow to clean energy projects.

YES BANK during the UN Climate Summit in September 2014 had committed to invest in 500 MW annually, which the bank later revised to a 5000 MW commitment over five years starting in February 2015. Realizing the potential of green bonds YES BANK saw an opportunity to demonstrate this in a developing economy.

 

Green Bonds by YES BANK

• February, 2015: In a significant step, YES BANK issued India’s first ever Green Bonds (AA+ by CARE) and one of the first amongst emerging economies raising an amount of INR 10 billion, in accordance with Green Bond Principles.  The bond was originally intended to be INR 5 billion plus green shoe option, which was oversubscribed twice, witnessing strong demand from leading investors including Insurance companies, Pension & Provident Funds, Foreign Portfolio Investors, New Pension Schemes and Mutual Funds.

August, 2015:  The bank’s second issuance of 10-year green bond raised INR 3.15 billion on a private placement basis with IFC. It was the first ever investment by IFC in an emerging markets green bond issue in the world.

• September, 2016: YES BANK has also raised INR 3.30 billion in September 2016, through an issue of a 7-year Green Infrastructure Bonds to FMO, the Dutch Development Bank, on a private placement basis. This is FMO’s 1st investment in a Green Bond issued by a bank in India.

KPMG, India has provided assurance services for FY 2015 – 2016, on the use of proceeds in accordance with the Green Bond Principles, for the first and second green bonds issued by YES BANK.

YES BANK was awarded as the Green Bond Pioneer for being the “Pioneers in Emerging Markets- India” by the Climate Bonds Initiative for its first issuance of green bonds in February, 2015

The second issuance of green bond by YES BANK in August, 2015 won the Special Award for Innovation (Structure) by Environmental Finance

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