3rd Energy Finance Conference India
Theme: How Clean is Green Financing?
Understanding the National and International Landscape, Investors & its Efficacy
Date: December 14-17, 2021
On Zoom Platform
Green finance is now central to the idea of building a sustainable world, offering a funding pipeline to meet climate commitments that can, at the same time, provide returns to investors. The universe of “green finance” includes debt and equity support to a host of environmentally sustainable projects, including renewable energy projects, vehicular electrification, solid waste management and recycling and energy efficiency. The financial instruments on offer now range from the creation of green banks and government budgetary allocations to ESG-compliant sovereign wealth funds, green bonds and carbon trading mechanisms.
But are the projects into which this money is flowing really green? Who is defining the parameters of what passes for green finance and what doesn’t? Where is the regulation that monitors compliance? At the ongoing CoP26 in Glasgow, long-term climate finance along with technology transfers from the developed world to the developing world are in focus, so as to enable a just transition.
A September 2020 study from the Climate Policy Initiative estimated that India will require approximately Rs 162.5 lakh crore ($2.5 trillion) from 2015 to 2030, or roughly Rs 11 lakh crore ($170 billion) per year for climate action. The group’s most comprehensive analysis on green investment flows in India found that green funds of Rs 1.11 lakh crore ($17 billion) flowed into India in FY 2017 and Rs 1.37 lakh crore ($21 billion) for FY 2018. This clearly proves that the market is huge but remains unexplored.
Even as governments and investors try to bridge this gulf, there are lessons from the past that we need to learn to chart the way forward, A clear criticism that arose from CPI study was the non-availability of data on the disbursement of funds, which makes the end-use of the money and its “green credentials” hard to track, and the lack of standardised reporting on green finance in the country. The first problem with green finance in India is that there is no clarity on how we use the label in India.
This naturally leads to an abundance of “greenwashing” of finance in the country. Greenwashing, within the scope of finance, is defined as inflated claims of environmental compliance, lack of clear taxonomy, a misalignment of interests between investors – who may have clear aims in mind – and project executives, who may be driven by short-term interests and an inadequate emphasis on sustainable livelihoods.
The Reserve Bank of India (RBI) oversees financial regulation of currency and banking in the country. While the central bank has consistently spoken about the need for regulation and taxonomy of green finance in the country, it has so far failed to introduce either into the Indian banking and credit systems.
As part of its green finance initiative, the RBI included small renewable energy projects under its Priority Sector Lending scheme in 2015. But as of March 2020, the aggregate outstanding bank credit to clean energy stood at Rs 36,543 crore, just 7.9% of the outstanding bank credit to the power generation in India. Private issuers of green bonds entered the domestic market in 2015 but still account for only 0.7% of all the bonds issued in the Indian financial market, despite enhanced regulations and listing opportunities offered by the capital market regulator. Neither opportunity has truly taken off.
At the core, though, we must recognise the fault lines that lie within our sustainability goals. CFA’s own extensive past research has shown that large clean energy projects, while delivering greener power than coal, often make local environments and livelihoods unsustainable. The conflicts over land and water, displacement and resettlement of local populations, and localised losses weighed against policy gains are questions that need to be addressed when defining the parameters of green finance. Unregulated land acquisition rules for large solar parks, for instance, have displaced thousands of villagers for inadequate compensation; the human rights violations at some of India’s largest solar parks rival the dirty history of mega coal power plants; expanding wind farms have often killed local wildlife habitats.
Does this qualify as “green” in this new world that pushes sustainable development goals? The current impetus towards green investments must follow established rules of good governance and solid risk assessment practices so that the lessons from thermal project financing and project implementation from the past three decades can be used to avoid repeating the old mistakes. While we debate the contours of green finance in India and suggest guidelines for regulation, let’s also keep in mind that the rules of sustainability should apply to everybody in the value chain.
To address some of these questions and more, the Indo-German Centre for Sustainability at IIT-Madras and Centre of Financial Accountability, in association with Climate Trends will be holding an Online Conference in December 2021 on the topic of Green Finance, titled “How Clean is Green Financing? Understanding the National and International Landscape, Investors & its Efficacy.”
The objectives and learning outcomes:
- To gain an understanding of green finance, what it entails, who are the participants and what have been its key historical trends.
- To identify key areas of concern about green finance from a public interest perspective and how to prioritise climate-friendly investment without crowding out other needed development finance.
- To assess the impacts of green finance on the environment, agriculture, livelihoods and gender.
- To learn from best practices from across the developed and developing worlds and to assess the preparedness of Indian institutions in dealing with potential risks and adverse impacts due to investment choices.
- To share the proceedings with policy makers, decision makers and the wider public so as to help raise awareness on the current challenges and opportunities, the status of existing rules and regulations and to ensure adequate oversight on lending and investment.
Organisers: The Indo-German Centre for Sustainability, IIT-Madras &
Centre of Financial Accountability
Knowledge Partner: Climate Trends