NABARD’s ‘Climate Strategy 2030’ through Green Finance

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.