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Indian private sector bank Yes Bank has raised INR3.19 billion (US$49.4 million) from the issue of Green Infrastructure Bonds to International Finance Corporation (IFC) Washington to fund renewable energy projects including solar and wind power.

In a statement, Yes Bank said this is the first investment by IFC in an emerging markets green bond issue. The bonds are for a tenor of 10 years.

Yes Bank said the funds would be used “to finance green infrastructure projects like solar power and wind power in the renewable energy space”.

They will also be used to help the bank meet its commitment of financing 5GW of renewable energy projects by 2020, which it made at the first Renewable Energy Global Investors Meet & Expo hosted by India’s Ministry of New and Renewable Energy (MNRE).

KPMG in India will be providing annual Assurance Services on the use of proceeds in line with the Green Bond principles.

The Yes Bank statement said that India’s 175GW by 2022 renewable energy target (100GW solar) would require significant financing. There are challenges in existing financing mechanisms including sector limits, high interest rates and asset-liability mismatch. Consequently, there is a need to evolve innovative financing mechanisms to aid renewable energy projects.

Rana Kapoor, managing director and chief executive of Yes Bank said: “This comes close on the heels of the highly successful issuance of India’s first ever green infrastructure bonds of INR10 billion by us in February this year, and strengthens our conviction and resolve to come up with more innovative and effective structures to support the acceleration of sustainable energy financing.”

Inessa Tolokonnikova, IFC’s Financial Institutions group manager for South Asia, said: “Green bonds have opened a new finance flow that will be essential to confronting climate change impact. IFC’s investments in programmes like Yes Bank’s green infrastructure bonds, will also encourage issuers in other markets to issue similar bonds and support greater resources for climate change finance.”