Page 37 - Banking Finance April 2021

ARTICLE

India: Putting Greener Footprints economies do not have any effective legal framework or
initiative to promote and regulate Green Financing.
Though there is no dedicated regulatory framework for
Recently, the Reserve Bank of India has also recognised that
Green Finance in India, there are statues and guidelines
a policy action is needed to boost Green Financing, and
issued for promoting Green Finance. To name a few, (i) the
Companies Act, 2013 requires companies to be engaged in address certain challenges such as greenwashing, non-
standard definitions and imbalance between long-term and
corporate social responsibility (CSR) activities, which inter
short-term interests of investors. Further, high cost of funds
alia includes "ensuring environmental sustainability", (ii) the
Securities and Exchange Board of India had also, in 2018, and lack of technological advancement also acts as a barrier
to the promotion of Green Finance.
issued guidelines in relation to issuance of green bonds, and
(iii) the Reserve Bank of India has notified renewable energy
Lastly, existence of sector specific regulatory barriers, such
as one of the priority sectors for lending.
as procuring licenses and governmental approvals in some
In view of the above, several Indian entities such as the Indian jurisdictions also restricts the growth of green projects.
Renewable Energy Development Agency, Yes Bank Limited,
NTPC Limited, Greenko Group etc. have issued green bonds. Collaboration: The Key for a Greener
Further, Indian banks are also offering green loan products, Tomorrow
such as the green home loan scheme by State Bank of India12,
solar energy loan scheme by Union Bank of India13 and biogas Though, there is a need to give our future generations a
plant loan scheme by Punjab National Bank. developed world to live in, it is also imperative to provide
them with a healthy and green environment. Our
In 2012, the BSE SENSEX had also launched BSE-GREENEX, responsible actions today shall determine the future of our
an index of top 25 (previously top 20) companies in terms of coming generations.
greenhouse gas emissions, market cap and liquidity. Further,
the Confederation of Indian Industry has also established the Against the backdrop of the current situation, it is important
Indian Green Building Council (IGBC), which certifies to cultivate an ecosystem which enables economic growth
whether construction of building involves green initiatives. and environmental protection simultaneously. While Green
Accordingly, green building certifications namely Certified, Financing seems to be the way of putting in place such an
Silver, Gold and Platinum are provided to all such buildings ecosystem, collaborative efforts between the public and
which meet the criteria laid down by IGBC. private sector is the need of the hour!

With the above developments, lenders are now putting While GLP can be the cornerstone for having such a debt
certain green covenants in their term sheets as well. For based Green Finance framework in place, it can be further
instance, lenders are asking commercial real estate borrowers reassessed keeping in mind the needs of the Indian economy
to obtain green building rating from IGBC. For industrial at present.
borrowers, lenders are putting covenants as regards pollution
control and greenhouse gases emission control. The ultimate goals and benefits, that can be reaped through
Green Financing, will boil down to the unified approach to
Green Finance: Present Hurdles be adopted by the governments, central banks, financial

Despite various innovative products being offered in the institutions, private enterprises and public at large.
Green Finance space and the urgent need for same, Green
Finance still faces some major challenges. Sources:
Various Sources
The biggest such hurdle being lack of a regulatory definition
on Green Finance and international standards for Disclaimer:
determining the same. Due to this, some borrowers often This article is intended for informational purposes and does
indulge in greenwashing. Save for a few countries, major not constitute a legal opinion or advice. T

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