Climate commitments and market risks: Analysing the drivers of sovereign green bond issuance in India

This research explores sovereign green bond (SGB) issuance in low- and middle-income (LMI) countries through the prism of India's 2015–2024 experience. We investigate the nuanced and time-varying relationships among climate change performance, geopolitical risks, and ESG ambiguity by applying a rolling window multiple correlation (RWMC) approach. Our examination yields three notable findings: first, that although individual drivers tend to exhibit a negative relationship with SGB issuance, their aggregate impact in the presence of credible climate policy and ESG uncertainty results in positive co-movement. Second, it is found that geopolitical risk connected to strong environmental governance in producing country increases SGB demand. Third, as the market matures and important landmarks are realized (such as a green taxonomy), elements that were initially perceived as risks appear to become complementary drivers. These results suggest that LMI nations can access SGBs based on their ability to strategically deploy environmental policy signals, increase regulatory details and navigate global risks. The Indian experience provides a replicable instance of how governance-driven institutional robustness can ensure that potential market trade-offs emerge as synergistic drivers for sustenance in finance.