India is set to kick off a second batch of sovereign green bond sales in a test of demand for the securities in an environment of higher global yields.

The Reserve Bank of India will auction 50 billion rupees ($600 million) of five-year notes Friday. The debut sale in January raised 80 billion rupees, garnering a so-called greenium — higher valuation because of its environmentally beneficial characteristics — of six basis points over the benchmark yield.

The yield on 10-year bond has climbed about 30 basis points from this year’s low in May, helped by tighter monetary policies by the RBI and central banks globally. Policymakers will get a first taste of what that means for India’s plans to affordably finance its transition toward green energy via market borrowing.

“Green, social and sustainability bonds are at the end of the day, bonds — whatever happens to macro markets will affect them,” said Xuan Sheng Ou Yong, ESG analyst at BNP Paribas Asset Management in Singapore. Investor demand for green bonds will increase faster than supply in Asia, and may be priced richer than conventional securities, he said.

Foreign investors are returning to India’s bond market with nearly $5 billion of inflows in 2023, after three years of net outflows. Many are being drawn in by JPMorgan Chase & Co.’s decision in September to add India to its widely tracked emerging markets bond index. That may widen the pool of demand for India’s rupee-denominated green bonds as well, said Sheng.