Context

Recently, the National Bank for Agriculture and Rural Development (NABARD) unveiled its Climate Strategy 2030 document on the occasion of World Earth Day.

NABARD’s Climate Strategy 2030 Document

• Aim : To address India’s need for Green Finance.
• It was released during the 78th Business Plan Meet (BPM) held at Thiruvananthapuram.
• It is structured around four key pillars to address this demand: 
  • Accelerating Green Lending across sectors, 
  • Playing a broader Market-Making Role,
  • Internal Green Transformation of NABARD, 
  • Strategic Resource Mobilization
• Objective : 
  • To reinforce NABARD’s commitment to environmental stewardship.
  • To be a pivotal player in India’s transition towards a resilient & sustainable economy.

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What is Green Finance? 

• As per the United Nations Environment Programme, Green Finance is to increase the level of financial flows (from banking, micro-credit, insurance and investment) from the public, private and not-for-profit sectors to sustainable development priorities.
• Examples of green finance include:
  • Buying eco-friendly goods and services 
  • The development of green infrastructure 
  • Green bonds 
  • Green mortgages
  • Green funds 
  • Green loans 
  • Sustainable credit cards
• It includes climate finance, but is not limited to it. 
  • It also refers to a wider range of other environmental objectives, such as industrial pollution control, water sanitation or biodiversity protection.
• Significance of Green Finance : 
  • To better manage environmental and social risks, 
  • Take up opportunities that bring both a decent rate of return & environmental benefit.
  • To deliver greater accountability.

Advantages of Green Finance 

• Facilitating Eco-Friendly Technologies : Green finance facilitates the widespread deployment of green infrastructure and other environmentally friendly initiatives within local markets.
• Competitive Edge : Development of low-carbon technologies through green finance provides businesses with a competitive advantage.
• Enhanced Business Value : Green finance adds value to a company’s portfolio, attracting stakeholders, investors, and current or potential customers.
  • Economic Boost : Businesses can encourage further green initiatives, thereby benefiting their financial pursuits while promoting sustainability. 
• Promotes the Importance of Sustainability : The adoption of green finance by one company can  inspire others to follow suit, influencing their local markets and promoting the development of renewable energy.

Challenges Related to Green Finance

• Lack of Standardization : Without a universal standard defining green finance, it’s challenging for both investors and consumers to discern genuinely committed companies from those engaging in greenwashing. 
  • Risk Assessment : The lack of standardization and available data complicates the pricing of green finance, posing challenges for accurate risk assessment. 

• • Data Availability  : Reliable data on green finance is scarce, making it difficult to quantify which companies are truly succeeding in implementing green finance initiatives. 
• Transition Risks : Transitioning to a low-carbon economy necessitates changes in business practices across various industries, potentially impacting investor portfolios. 
  • Additionally, evolving customer preferences and technological advancements may not align with the needs of green finance, further affecting investor portfolios.
• Regulatory Concerns :  Since green finance is heavily influenced by government policies, investors may worry that future environmental regulations could diminish the profitability of their investments.
  • Uncertain Financial Performance : Investor hesitancy may arise due to uncertainties between traditional and green finance, particularly concerning short-term returns despite proven long-term profitability.

How Green Finance can be Promoted ?

• Through changes in countries’ regulatory frameworks, 
• By Harmonizing public financial incentives, increases in Green Finance from different sectors, 
• Alignment of public sector financing decision-making with the environmental dimension of the Sustainable Development Goals, 
• Increases in investment in clean and green technologies, 
• Financing for sustainable natural resource-based green economies and climate smart blue economy, increase use of green bonds etc

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Sustainable Practices pledged by Leading Real estate developers from India

• DLF : By implementing practices such as zero-discharge water systems and sewage treatment plants, it has been able to recycle millions of liters of water daily, thereby reducing the strain on local water sources.
  • As the only Indian real estate company featured in the Dow Jones Sustainability Index for the past three years.
    • It exemplified commitment to environmental, social, and governance excellence.
    • They prioritize greenery preservation by transplanting mature trees, ensuring the continuity of Gurugram’s green landscape amidst infrastructural development.
• Signature Global (India) Ltd. : Majority of their  projects are either EDGE certified or IGBC gold-rated, demonstrating commitment towards the environment. 
  • They saved around 52% of water usage through various optimum water use practices.
• Remsons Industries Ltd. : They showcased exemplary performance in key areas such as Environment, Labour and Human Rights, Ethics, and Sustainable Procurement. 
  • It received a Gold Medal in the Ecovadis Sustainability Assessment.
    • This medal recognises Remsons Industries as one of the top 5% of all evaluated companies globally, reaffirming its commitment to environmental, social, and governance (ESG) excellence.

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