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India’s Approach Towards Finance Sustainability

Submitted by admin on March 29th, 2024

In 2023, India presided over the G20 summit. This has been crucial for the host country as well as participating ones for finding ways towards financial sustainability among others.

Nick Robinson demonstrates how the key points of a country’s sustainable finance framework are clear, and how an aggressive approach interlinking the human dimension and net zero could contribute to mobilizing the trillions desired, demanded, and dreamt by an ambitious economy.

‘One Earth, One Family, One Future’ was India’s slogan at the G20 summit, signifying a clear message of sustainability. The message also connects to India’s strategic objective of inviting investment worth trillions of dollars into the country’s infrastructure and its human resource and technological development. Ensuring air, energy, and clean water, building strong resilience to aggravating climate shocks, and speeding up the delivery of net zero should be at the core of making the fountain of investment successful. Beyond these and other green priorities, India’s sustainable finance is becoming imperative, focused on its people.

Budget Announcement 

In the first weeks of 2023, the country woke up to a flurry of investment announcements. That year, the central government‘s budget prioritized green growth, with spending allocated to renewables, energy storage, and hydrogen as well as the agricultural sector to make it more nature-friendly.

The government raised $1 billion, by issuing its first green bond, at a lower cost of capital than conventional bonds. The RBI announced new guidelines on climate disclosure, climate stress testing, and green deposits at banks. SEBI, a securities regulator, has been pursuing corporate disclosure and green bonds in the capital market for a while, which have transformed into routine financial decision-making.

It has now modernized its approach and launched new frameworks for yellow (solar) and blue (ocean) bonds as well as its own set of ‘dos and don’ts’ to stop greenwashing. The last year, 2023, was also the first year for the 1000 biggest guns in the corporate market to submit a BRSR (Business Responsibility and Sustainability Report). This was a crucial step for accountability in the context of social and environmental performance. These moves indicate that some key pieces of the sustainable finance puzzle are becoming evident. However, it’s still a concern how ESG factors (Environmental,  Social, and governance) will be integrated into decision-making related to routine financial challenges.

The recent eruption of anger over the governance of Adani Group has raised questions over the integrity in the corporate circle, leading to holding divestment by some international investors. As yet, the overall result of issuing green, social, and sustainable bonds has not been satisfactory, standing far below what is required for the country’s natural transitions and energy enablement.

A recent analysis of banks and other financial institutions across the country does not show significant effort to identify, manage, or measure the risks of low-carbon transition.

A clear definition of sustainable finance in the context of India’s priorities and requirements is yet to be made, which prioritizes the publication of India’s taxonomy.

The most important aspect of taxonomy recommendations drafted by India’s task force related to sustainable finance is the inclusion of social and fair transition guidelines from ground zero along with conventional goals regarding environmental financing.