By Bazgha Khan & Noria Farooqui

Green finance refers to the financial arrangements that are specific to the utilization for projects that are environmentally sustainable or projects that adopt the aspects of global climate change. It’s to extend the level of financial flows from banking, micro-credit, insurance and investment, the public, private and not-for-profit sectors to sustainable development priorities.

United Nations Environment Program (UNEP) has been working to align financial systems to the 2030 sustainable development agenda to direct financial flows to support the delivery of the Sustainable Development Goals with different countries, financial regulators and finance sector.
Green finance covers a large range of monetary products and services, which may be broadly divided into banking, investment and insurance products such as green bonds, green-tagged loans, green investment funds and climate risk insurance.

An initiative as sustainable stock exchange is recommended to come up with stock price indices that track the stock performance of a set of companies in recognizing the Environmental, Social and Governance (ESG) principles. There are four regulatory frameworks across the globe. First is the sustainability disclosure by financial and non-financial companies, second is the directed and concessional lending, third are the micro and macro-prudential regulations of financial and non-financial institutions, fourth is the establishment of green financial institutions.

India has started emphasizing on green finance as early as 2007 with several fiscal and financial incentives. The initiative was started by RBI as “Corporate Social Responsibility, Sustainable Development and Nonfinancial for banks. In the year 2008, The National Action Plan on Climate Change (NAPCC ) was formulated with a vision to outline the broad policy framework for mitigating the impact of climate change followed by other initiative such as “The Climate Change Finance Unit” in 2011. In 2019, India has announced its most ambitious target to reach 450 GW of renewable energy generation capacity by 2030.

Source: SSRN