Article On Green Fin and in India
Article On Green Fin and in India
Article On Green Fin and in India
Economic
growth
Importance Of Green Finance availing of the global warming and the need for
more sustainable business practices, Green
Green Finance is important as it promotes and
Finance Initiatives have also been addressing
supports the flow of financial instruments and
the 2030 Sustainable Development Goals
related services towards the development and
(SDG‘s) Agenda by emphasizing the shift of
implementation of sustainable business models,
focus from shareholders‘ value creation
investments, trade, economic, environmental
(economic) to the generation of stakeholders‘
and social projects and policies. As the financial
value (economic, environmental and social).
sector plays a key role through its intermediary
Green Finance represents the future of the
functions and risk management in advancing
financial sector through innovative financial
sustainable economic development while
mechanisms and by supporting the investments
directing investment to the real economy, the
in projects with positive and sustainable
intertwinement of these two is crucial.
externalities
Moreover, based on the lessons learned from
the global financial crisis in 2006-2009, the
Key Actors In The Success Of A Green Finance Uptake
CURRENT FOCUS CHALLENGES TO GREEN FINANCE
UPTAKE
To deliver on NDCs while balancing GOVERNMENT No formal tracking of budget allocations
inclusivegrowth to assess if flows are sufficient to meet
o To deliver on long-term low carbon NDCtargets
vision, government launched a number of Inadequate guidance at policy level to
efforts in areas such as Clean and efficient drive capital flows into climate-
energy, Smart Cities, Green Buildings, Make friendlyprojects
in India, Urban Mobility,etc. Existing efforts mostly focused on RE
o Pricing fossil fuel consumption (solar and wind) and not being replicated "at
through coal cess and incentivizing through a similar scale" across other sectors like
PAT schemes, Feed-in-tariffs and renewable sustainable transport, greenbuilding
energy certificates
Institutional investors, that have access to CAPITAL Insurance, pension, and mutual funds not
long-term funds, do not consider climate MARKET focused on greenfinancing
change risk in their investment PLAYERS
decisionmaking Limited sectoral knowledge and
assessment tools to categorize and assess
environmentally-friendlysectors
Current models do not recognize RATING Not integrating climate change risk into
climaterisks AGENCIES rating models and do not have enough
framework or motivation to undertake this
No premium placed when assessing without regulatory guidance and investor
project, activity or green associated in demand
environmentally-friendly sectors. No
additional risk attached to conventional
investments that are not aligning to
1.5°scenario
140 60
EmergingMarkets
Developed Markets 50
Financial Institution
100
120 Corporate 40
Corporate
80
Financial Institution
Government Agency 30 Government Agency
60
Municipal Municipal
20
40
Sovereign 10 Sovereign
20
0 0
Source:IFCanalysis,Bloomberg,EnvironmentalFinance,ClimateBondsInitiative.
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Above table shows that there is increase in Green Finance products from the year 2010 to the
year 2020. And it is also expected that there would be increase in requirements of green
financein the year 2030
Table 3 Green Finance Associate Companies
States Amount (In corers) No of Companies Amount (In corers)
Andhra Pradesh 10292 480
Assam 509 24.09
Bihar 32 110.5
Chattishgarh 945 119
Gujarat 576 96.68
Karnataka 2318 158.27
Kerala 4079 149.09
Madhya Pradesh 10282 152
Maharashtra 1329 49
Orissa 13434 104
Rajasthan 506 61.65
Punjab 957 16.95
Tamil Nadu 1566 59.40
Uttar Pradesh 279 10.55
West Bengal 10000 37
Growth of nations will increasingly get In India a Council on Climate change under
defined and measured by their ability to the supervision of Prime Minister was
balance economic growth and constituted in 2007 and reconstituted in
environmental considerations. Many 2014 for adaptation and mitigation of
developing and developed nations are climate change. It has launched various
making significant strides, challenging the programs like National Action Plan on
economic and financial status quo, and Climate change, Jawahar Lal Nehru
upgrading themselves with eco-friendly and National Solar Mission, National water
environmentally-aware institutions and Mission, National Mission for Enhanced
processes. India needs to undertake similar Energy Efficiency, National Mission on
bold steps that are strategic to its growth in Strategic Knowledge for Climate Change,
the next few decades. While creating a National Clean Energy fund. Other
green finance taxonomy is only a first step programs like Auto Fuel vision and Policy
to this longer-term endeavor, it is a 2025, Expert groups on Low Carbon
significant one that can ensure ―growth‖ and Strategies, etc. In 2015 the Green Climate
―green‖ are emphasized in parallel to foster Fund set up under the framework of the
in a modern era of ―green growth‖. United Nations Framework Convention on
Climate Change (UNFCCC) has accredited
Future Scope Of Green Finance In India
NABARD as National Implementing Entity
Environment sustainability being a key (NIE) to finance clean energyprojects in
issue on worldwide level has increased the India.
scope for investment in green projects
utilizing renewable energy resources. Recent Government Policies And
Therefore, many banks and financial Incentives Of Green Finance In India
institutions would look forward at tapping The Recent Government Policies and
this growing sector. Thus, there will be Initiatives which have increased the Scope
increase in demand for Green bonds and of Green Financial Products In India are as
structured green funds. Moreover, investors follows:
would get the benefit of diversification from 1. India‘s National Action Plan on Climate
investment in such bonds. This is true in Change recommended that country
context of India also as a study of Mc shouldgenerate10% of its power from
Kinsey &co. found that a probable increase renewable energy resources by 2015 and
in carbon emissions to 5 – 6.5 million MT in 15% by2020. Of India‘sinstalled power
India could be lowered by 30% to 50% by generation capacity of 2, 55,012.79
2030 by investing in energy efficient megawatt(MW), renewable power has
technologies in building infrastructure and ashare of 12.42% or 31,692.14 MW
for this purpose there would be need for an which shows thatthere exists a huge
additional 600 – 750 billion Euros even scope for investmentin this sector.
after accounting for steep decline in cost of 2. The Ministry of New and Renewable
renewable energy technologies. Energy (MNRE) has revised its targets
International Finance Corporation (IFC) has forenergycapacity to 1, 75,000 MW till
taken a step in this regard. It has decided to 2022, comprising 1, 00,000 MW solar,
invest $75 million in green bonds issued by 60,000MW wind,10,000 MW biomass
Punjab National Bank Housing Finance Ltd. and 5,000 MW small hydro. These
in 2015. These are secured non – revised targets demand a huge
convertible debentures whose proceeds will investment. Since, the sanctioned budget
be directed towards the construction of would not suffice so MNREhas asked
Green residential buildings certified by the public and private sector financial
World Bank‘s EDGE. institutions such as Power
FinanceCorporation (PFC), Rural
would be need for an additional 600 – 750 for energy capacity to 1, 75,000 MW till
billion Euros even after accounting for steep 2022, comprising 1, 00,000 MW solar,
decline in cost of renewable energy 60,000 MW wind, 10,000 MW biomass
technologies. International Finance and 5,000 MW small hydro. These
Corporation (IFC) has taken a step in this revised targets demand a huge
regard. It has decided to invest $75 million investment. Since, the sanctioned budget
in green bonds issued by Punjab National would not suffice so MNRE has asked
Bank Housing Finance Ltd. in 2015. These the public and private sector financial
are secured non – convertible debentures institutions such as Power Finance
whose proceeds will be directed towards the Corporation (PFC), Rural Electrification
construction of Green residential buildings Corporation (REC), Indian Renewable
certified by World Bank‘s EDGE. Energy Development Agency (IREDA),
In India a Council on Climate change under IFCI Ltd, SBI Capital Markets ltd and
the supervision of Prime Minister was ICICI bank ltd to raise funds.
constituted in 2007 and reconstituted in 3. The finance ministry has increased the
2014 for adaptation and mitigation of clean energy cess on coal by Rs.100 per
climate change. It has launched various metric tonne to fund clean environment
programs like National Action Plan on initiatives. The scope of National Clean
Climate change, Jawahar Lal Nehru Energy fund (NCEF) has been expanded
National Solar Mission, National water to include financing and promoting
Mission, National Mission for Enhanced clean environment initiatives and fund
Energy Efficiency, National Mission on researches towards that end.
Strategic Knowledge for Climate Change, 4. The government has also proposed the
National Clean Energy fund. Other use of renewable energy resources in
programs like Auto Fuel vision and Policy railways sector. It includes use of CNG
2025, Expert groups on Low Carbon in train operations, setting up of water
Strategies, etc. In 2015 the Green Climate recycling plants, use of solar energy to
Fund set up under the framework of the illuminate coaches, station buildings and
United Nations Framework Convention on platforms. There is also a proposal to
Climate Change (UNFCCC) has accredited change the design of locomotive cabin
NABARD as National Implementing Entity to reduce the noise level.
(NIE) to finance clean energy projects in 5. Other initiatives on part of government
India. includes its plans for creating a solar
The recent government policies and army, providing venture capital to
initiatives which have increased the scope of ambitious solar power generation
Green financial products in India are as projects and setting up of solar parks
follows: totaling 20,000 MW over a period of
1. India‘s National Action Plan on Climate five years.
Change recommended that country 6. Indian Innovation Lab, a new initiative
should generate 10% of its power from of MNRE aims at bringing the public
renewable energy resources by 2015 and and private leaders on common platform
15% by 2020. Of India‘s installed power to develop innovative instruments that
generation capacity of 2, 55,012.79 would mitigate risks and direct more
megawatt (MW), renewable power has a investment for green growth in India. It
share of 12.42% or 31,692.14 MW has launched four winning ideas: Loans
which shows that there exists a huge for SME, Rooftop Solar Private Sector
scope for investment in this sector. Financing Facility, P 50 Risk solutions
2. The Ministry of New and Renewable and RenewableEnergy Integrated
Energy (MNRE) has revised its targets Hedging, Equity and Debt fund.
Above chart indicates that asper the interest, short maturity period and non-
government estimates, India would required existence of non-recourse debt.
USD 2.5 trillion (at 2014-15 prices) to meet 3. The current market practices,
climate change action committed to be regulations monitoring the market and
achieved till2030 financial incentives are becoming a
Further, India has embarked upon the great hurdle in the success of financial
ambitious target of building 175 GW of instruments.
renewable capacity by 2022, from just over 4. Several risks associated with the green
30 GW now, this requires the massive finance in the form of technology related
funding of USD 200Bn. Achievability is risk, currency risk, off taker risk
contingent upon requisite funding at becomes hurdle in the availability of
reasonable capital cost; green bonds fits the financial resources.
bill perfectly. According to Bank of 5. Lack of awareness amongst the
America-Merrill Lynch, the domestic green investors about the innovative financial
bond market has a $125-billion opportunity instruments also creates hurdle in green
by 2025. It expects around $32 billion of financing.
such bonds being sold over the next five 6. Lack of efficient framework for project
years. evaluation of a sustainable project
Findings mainly in case form early stage
innovation becomes a challenge for
1. Indian green Finance market is at an
channelizing funds towards green
emerging stage and it has not been able
to attract ample number of investors.. It projects.
requires proper framework for making 7. As far as blocks to green investments
these green finance products more are concerns there are there physical
attractive to the investors. barriers such as limited access to grid
2. Due to high cost of debt capital the connections which can limit the march
investment in green projects becomes of green finance along with financial,
very expensive. High cost of debt is behavioral and informational hurdles.
attributed to the factors like high rate of Hence for the transition to a green
growth pathway, dramatic upgrades in
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