Green Financing Initiatives
The government is exploring avenues to enhance green financing with potential announcements expected in the February 1 budget. The initiative includes the possible establishment of a credit guarantee fund to support loans at reduced interest rates for green projects.
Credit Guarantee Fund
- Entities like the National Credit Guarantee Trustee Company and Credit Guarantee Fund Trust for Micro and Small Enterprises may be involved in setting up the fund.
- The fund aims to lower interest rates for borrowers transitioning to cleaner energy sources and reducing carbon emissions.
- Multilateral agencies might also contribute to this fund.
Challenges in Green Financing
- RBI Deputy Governor Rajeshwar Rao highlighted the challenges in assessing the viability of green projects due to their reliance on emerging technologies.
- These projects carry an increased credit risk compared to traditional projects.
Public-Private Partnerships
- The government is encouraged to bolster efforts in sustainable finance through public-private partnerships and blended finance options.
- Development financial institutions (DFIs) could play a significant role.
Bank Sector Involvement
- A working group from state-run banks, including the State Bank of India, has offered suggestions to broaden the scope of sustainable finance.
- Once a climate taxonomy is established, it will facilitate structured risk assessment for lenders.
Government Initiatives
- Finance Minister Nirmala Sitharaman announced plans to develop a climate finance taxonomy to boost capital availability for climate adaptation and mitigation.
- This initiative is expected to aid in achieving the nation’s climate commitments and green transition.
Investment Requirements
- According to the Council on Energy, Environment and Water (CEEW), India's net-zero 2070 pathway necessitates a total investment of $10.1 trillion.
- The investment gap stands at $3.5 trillion, with required support amounting to $1.4 trillion, averaging $28 billion annually.
