India is testing the waters of a sluggish global green bond market, with a debut sale this month to raise $2 billion for sustainable projects.

Indian officials have made clear they want to sell large quantities of “green gold” to lower the country’s borrowing costs, and that will require attracting enough foreign investors to buy rupee-denominated debt.

Green bond sales fell for the first time in a decade last year as tight monetary policy impacted issuance and asset managers came under fire for alleged green money laundering. Globally, companies and governments raised $863 billion in green, social and sustainability-related bonds in 2022, down 19% from a record $1.1 trillion in 2021, according to data compiled by Bloomberg.

So far this year, at least two governments, led by Hong Kong, have issued bonds equivalent to $5.8 billion in three currencies. Ireland received a €35 billion ($37 billion) order to sell 20-year bonds for €3.5 billion.

India is putting its first sovereign green bond on the radar of some of the country’s most prominent asset managers, including state-run insurers and pension funds, as well as foreign investors from Japan to Britain, according to people familiar with the matter, in a bid to boost demand and this matter.

Green bond issuance fell in 2022 for the first time since prominent asset managers became interested in emerging markets.

India may be a latecomer to the Asian green bond market, but sovereign issuers remain a select club outside Europe. That could make its sale more attractive to foreign investors with a green mandate, despite the currency risk of the rupee-denominated bond.

Raising sufficient financing at a low cost is critical to meeting renewable energy targets set by India, which relies on fossil fuels for more than half of its energy needs.

In addition to building renewable energy capacity, proceeds from the sale could be used to make a more resilient infrastructure to rising temperatures and extreme weather. Globally, funding for climate adaptation as part of the 2015 Paris Agreement is far from being split 50-50 with mitigation measures aimed at reducing emissions.

With a domestic ESG debt funds shortage, Indian corporate issuers do not always see the cost and effort of green-labelling their debt as worthwhile. Establishing a clear sovereign bond benchmark and the greater investor interest it could bring could change that.

Indian companies have issued more than $26 billion of such debt, primarily for renewable energy projects.