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A Green Bond is a fixed-income debt instrument (a bond) issued by a corporation, government, or financial institution to raise capital exclusively for projects that have a positive environmental or climate-related impact.
Structurally, a green bond is identical to a conventional bond: the issuer borrows money from investors for a fixed period and promises to pay interest (coupon payments) and return the principal at maturity.
The fundamental difference lies in the ring-fencing and transparency of the use of proceeds.Issuance: An entity (e.g., a utility company, a municipality, or a bank) decides to raise capital for an environmental project, such as building a wind farm or financing energy-efficient upgrades.