New Delhi, India – India must urgently devise innovative strategies to raise domestic resources for climate finance, as funds from developed nations to the Global South remain critically low. This was the consensus among experts at the BT India's Most Sustainable Companies Summit and Awards, held recently.
During a session titled "Climate Finance: The Missing Money," discussions highlighted the disparity between promised and delivered international climate funding. Experts also emphasized the critical need for a standardized green taxonomy to ensure more targeted fund flow and greater accountability for public investments.
The Global Funding Gap and India's Response
Leena Nandan, former Secretary, Ministry of Environment, Forest and Climate Change, pointed out the inadequacy of funds flowing from developed countries to the Global South. She stressed that India must balance its growth aspirations with sustainable development, employing both offensive and defensive measures.
- Defensive measures: Include making carbon trading mandatory for several sectors.
- Offensive measures: Involve signing agreements with various companies for green funding initiatives.
Leveraging Domestic Capital and Addressing Risks
Samir Sharma, Head-CSR and Sustainability at L&T Finance, highlighted a stark statistic: out of the $100 billion promised annually by developed countries, only approximately $300 billion has materialized over a 13-year period. "If you see that money, much of that is commercial loans. That is one very, very big problem which we have," Sharma noted.
He proposed leveraging India's vast domestic savings, particularly from institutions like the Life Insurance Corporation of India and various pension funds, for climate finance. Sharma acknowledged the inherent challenges:
"Whenever we see a climate related project, we tend to see the risks. People are afraid to fund the projects...the gestation period is huge."
Sharma also advocated for India to secure more grants and fewer commercial loans for green finance projects and called for the institutionalization of carbon markets with clear policy guidelines to broaden their scope.
Accountability and Green Taxonomy
Shriram Subramanian, MD, InGovern, offered a different perspective, noting that while India's listed corporate sector accounts for only 15-20% of the GDP, it bears the brunt of disclosures and accountability. Conversely, the public sector, which constitutes the majority of the economy and provides public funding, often lacks similar oversight.
"India has capital but we don't use it productively. There is no disclosure and accountability of public money," Subramanian asserted.
He also highlighted challenges in adaptation finance, where projects addressing perennial issues like air pollution in Delhi or traffic congestion in Mumbai struggle to attract funding due to unmeasurable or unseen returns.
Adding to this, Nikunj Dube, Chief Ratings Officer, CareEdge-ESG Ratings, underscored a fundamental hurdle: India's lack of standardized definitions for green taxonomy. "This definition needs to be given for allocation of finance," Dube stated, emphasizing its importance for efficient and effective fund deployment.