Green bonds, greener cities: Financing tomorrow's infrastructure today– Vadodara leads the way
Recent conversations in financial and policy circles, particularly around municipal reform, are beginning to address this gap. A growing consensus is emerging: cities must embrace structured fiscal planning, climate-conscious accounting, and investor-grade transparency to tap into evolving capital markets.
Empowering Cities: Launch of The Green Book | SEBI Event, Thiruvananthapuram
In a bold departure from traditional models, Vadodara Municipal Corporation (VMC) issued Asia's first globally certified Green Municipal Bond, raising ₹100 crore for environmentally aligned water and sanitation projects. Certified under the Climate Bonds Standard and oversubscribed nearly 14.6 times, the bond sets a new benchmark for urban climate finance in India.
Building market-ready municipalities
To close the disparity in how ULBs contribute to the national GDP, municipalities must prioritize credible accounting, climate-aligned disclosures, and surplus management as prerequisites for sustainable borrowing.
In FY 2023-24, VMC reported a revenue surplus of ₹163.74 crore and secured an AA+ (Stable) credit rating. This financial robustness, paired with transparent disclosures and structured budget planning, helped bolster investor confidence. A funding mix of 65% from state support and 24% from internal resources also illustrates a gradual but crucial shift away from grant dependence.
Catalysing a national dialogue
The recent discourse on strengthening municipal finance gained fresh momentum through the Municipal Bond Outreach Programme, conducted by the Securities and Exchange Board of India (SEBI) from June 30 to July 1, 2025, at Thiruvananthapuram. The initiative brought together key stakeholders, including city officials, regulators, credit agencies, and financial institutions, to chart a roadmap for market-based urban finance.
Designed to build institutional capacity and enhance market readiness, the programme featured focused sessions on structuring bond issuances, regulatory compliance, credit ratings, and continuous disclosures. Participants engaged with intermediaries and case studies to gain practical insights into accessing capital markets.
A key highlight of the event was the official launch of 'The Green Book – On Climate Finance & Green Municipal Bonds' by the Vadodara Municipal Corporation. The launch was led by senior members of VMC, including the Hon'ble Mayor, Municipal Commissioner, Deputy Mayor and Chairman during a dedicated session celebrating Vadodara's pioneering role in the municipal bond ecosystem.
The spotlight on VMC highlighted how fiscal transparency, strong governance, and investor engagement are essential to building financially empowered, market-ready cities.
Reimagining urban finance: Beyond bonds
While green municipal bonds have emerged as a transformative tool for climate-aligned infrastructure financing, Vadodara's experience signals the need for a broader financial vision. 'The Green Book – On Climate Finance & Green Municipal Bonds' report highlights several alternative and complementary financing avenues that Urban Local Bodies (ULBs) can leverage to strengthen fiscal autonomy and unlock capital for urban development.
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