New Delhi, Oct. 10 -- India's sovereign green bond programme, launched in FY23 to fund climate-focused projects, is facing its toughest year yet. Though the government has an ambitious Rs.25,342 crore borrowing target for FY26, weak investor appetite may force it to reconsider its plan after a recent 30-year reissue raised only half the intended amount. Mint unpacks the reasons behind the drag in India's green bonds.

India's green bonds are struggling to stand out from regular government securities. With no clear pricing edge or incentive, most investors see little reason to buy them.

Although markets generally anticipate a "greenium"-where green bonds carry slightly lower yields than regular ones-India's sovereign green bonds have show...