A striking feature of the green bond market last year was the emergence of many new issuers from developing countries – particularly India and China.

Notable among them was Yes Bank, one of India's largest commercial banks, which came to market with two issues during the year.

Its inaugural bond, launched in March, was the first from an Indian issuer – and raised INR10 billion ($161.2 million), twice its original target. The 10-year, 8.85% bond, arranged by Yes Bank itself, was bought by a range of domestic and foreign institutions, including pension funds and insurance companies.

But the bank's return to the market in August caused even more of a stir, because of its unusual structure. Although smaller, at just INR3.15 billion, and issued as a private placement to the International Finance Corporation (IFC), many green bond specialists see this deal as a potential template for other emerging market issues.

Like Yes Bank's first green bond, its second issue will be used to finance renewable energy projects in India – particularly wind and solar – to help the country reach its ambitious goal of 175GW of renewables capacity by 2022. Yes Bank aims to finance some 5GW of this itself. KPMG India will provide annual assurance about the use of proceeds from both bonds.

The innovative aspect of the transaction is that IFC paid for the placement using the proceeds from another green bond of the same size issued in the offshore rupee market. This IFC bond was issued under the organisation's $3 billion offshore rupee 'Masala' bond programme and was the first Masala issue to be listed on the London Stock Exchange.

The five-year deal carries a 6.45% coupon and was underwritten by JP Morgan.

"There has been 'a lot of interest from other clients, in India and elsewhere'" - Ben Powell, IFC

"A listing in London allows us to attract the widest possible range of international investors [and] adding the rupee as a new green bond currency also supports our goals to strengthen this important asset class," said Jingdong Hua, IFC vice-president and treasurer.

Yes Bank is a long-standing client and wanted to issue a green bond in its local currency, explained Ben Powell, head of funding, treasury market operations at the supranational. As IFC had an established Masala bond financing programme, "we realised we could finance this [Yes Bank] issue with a green bond of our own," he adds.

The IFC has a lot of experience in green bonds and is heavily involved in the Green Bond Principles. It is therefore well-placed to advise clients on structuring, reporting and use of proceeds, "to ensure they are nicely put together," Powell says.

To date, the IFC has issued just over $5 billion of green bonds through more than 50 separate transactions in 10 currencies.

The back-to-back structure means that "IFC is taking the risk on Yes Bank, rather than taking the risk on the projects," explains Arun Kumar Sharma, chief investment officer in IFC's financial institutions group. "Yes Bank is in a much better position [than the IFC] to manage the risk and they know the landscape very well. We want to create similar platforms in other markets."

Speaking at the launch of the deal, Rana Kapoor, CEO of Yes Bank, said: "This transaction cements our bank's status as a pioneer in green energy financing in India. ... [It] strengthens our conviction and resolve to come up with more innovative and effective structures to support the acceleration of sustainable energy financing."

Further green bonds are planned, a spokesman says, and Yes Bank hopes to list a $500 million issue on the LSE by the end of this year.

The back-to-back transaction sparked immediate enquiries from other potential issuers. There has been "a lot of interest from other clients, in India and elsewhere," confirms Powell at the IFC. "But it is too early to say when the next one will be ... we are working on it".

In April, the supranational again used its Masala bond programme – though not a dedicated green bond – to buy the full INR2 billion of green bonds issued by India's Punjab National Bank Housing Finance to fund sustainable housing that generates both environmental and economic benefits.