One of the suggestions made by stakeholders, including banks, is to create a specific fund set up by state-run financial institutions for lending and refinance to smaller and emerging companies, said people aware of the developments.
“The proposed fund structure aims to help smaller companies scale up green operations and secure lower-cost credit, tied to meeting specific carbon emissions reduction targets,” said an official, who did not wish to be identified, adding that it would be easier to monitor smaller firms to ensure that they are following norms and not greenwashing.
Greenwashing refers to firms falsely claiming that they are reducing polluting emissions.
The fund can be set up by firms such as IIFCL and IREDA, and developmental financial institution NaBFID, the official said, adding, “This is also being discussed with sectoral regulators like the Reserve Bank of India (RBI) and market regulator, Securities and Exchange Board of India.” “More clarity will emerge when the sector definitions are in place, making it easier for foreign investors to participate,” said another official.
Suggestions on transition finance are part of various measures being examined to promote green finance, according to the official.The government is expected to come out with a taxonomy for climate finance in the next seven to 10 months, as announced in the budget in July.Separately, bankers in August met officials from France for discussion on green finance and climate change. “It was held through the Indian Banks’ Association (IBA), and there were discussions on how G20 nations can help fund the cost of transformation to a low-carbon economy in developing countries,” said a senior bank executive, adding that this was also shared with the finance ministry. In her budget speech, finance minister Nirmala Sitharaman had said that the government would develop a taxonomy for climate finance to help improve the availability of funds for adapting to climate change and reducing greenhouse gas emissions. “This will support the achievement of the country’s climate commitments and green transition,” she said.
Last month, RBI governor Shaktikanta Das acknowledged the scalability challenges in green bond and green deposit frameworks and observed that the market for green bonds needed to expand significantly to attract larger issuances and a diverse set of investors. “Ensuring authenticity and the impact of green projects, financed through these frameworks, requires robust monitoring and reporting mechanisms,” he said.