India’s JSW Group, which runs emissions-heavy businesses including steel, cement and energy, is planning to convert most of its bonds into green instruments as the industrial giant seeks access to long-term lending.
Will allow the tycoon-led conglomerate to raise debt overseas through green and sustainability-linked bond issues Sajjan Jindal Group’s chief financial officer Seshagiri Rao said in an interview that it is difficult for companies raising funds in India to nearly double their tenure to 10 years for long-term financing. There is a “high probability” that the company will switch to selling only stability-linked bonds or green bonds over the next five years, he said.
Green bonds are instruments that are used to raise funds for eco-friendly projects. On the other hand, SLBs can be used more broadly, but they are associated with sustainability goals such as carbon reduction, In India, companies including JSW often issue these bonds overseas because the local market is not as mature. India’s bond sales with a green or sustainability label stood at about $6.9 billion in 2021, up from $875 million the previous year, according to data compiled by Bloomberg.
Companies around the world are raising sustainable debt through instruments tied to their environmental goals as pressure from investors and regulators mounts. In the metals and mining sector, billionaire Andrew Forrest’s iron ore giant Fortescue Metals Group Ltd raised money through a green bond earlier this month.
For JSW, which has at least $2.15 billion worth of international bonds due by 2027, tapping the overseas market will be crucial as Indian lenders are wary of long-term loans in the infrastructure sector, which could be worsened by a crisis. went. Shadow banking industry a few years back.
Rao said the group raises a third of its funds through bonds and the rest through export credit agencies and external commercial borrowings, with annual revenues of $13 billion.
“More and more investors, banks and the entire financial system would like to invest only in companies that are ESG-compliant and companies that have a roadmap on how they will reduce emissions,” Rao told his office in Mumbai. “Otherwise it will be difficult to raise the funding itself in the future. So the company will have to move in that direction.”
The group has raised around $1.6 billion through SLBs and green bonds. Last year, the flagship JSW Steel Ltd. raised $500 million SLB to reduce emissions from three mills in India by about 23%, with a potential to reduce carbon dioxide from about 1.95 tons per tonne of crude steel produced by the end of the decade. , The target took into account emissions from the company’s own production – Scope 1 – and energy use – Scope 2. If JSW fails to meet the commitments, it will have to pay a one-time coupon step-up of 37.5 basis points.
The group has outlined a plan to spend $1 billion to cut emissions at its steel mills and Rs 750 billion ($9.8 billion) to move its power business JSW Energy Ltd from coal to renewable sources.
While the transition to industries such as the group’s steel and cement operations – traditionally among the biggest polluters – is being made in the backdrop of India’s own national goal of turning carbon neutral by 2070, a large part of the push is being made by foreign investors and foreign investors. operated by customers. ,
For JSW Steel, which sells nearly a quarter of its total exports to Europe, the region’s plan to impose a customs tax on carbon-intensive imports such as steel and aluminum is giving impetus to its plans to cut emissions, Rao said. said.
Rao said the mill is automating its processes to measure real-time carbon emissions against monthly data in preparation for the new regulation before shipping its products to Europe. He said the steel unit has cut total emissions by about 27% since 2005.
“The whole strategy right now is to expand and ensure that the carbon emissions in the blast furnace process of steel making are comparable to the rest of the world,” Rao said.
This story has been published without modification in text from a wire agency feed. Only the title has been changed.