The liberalised external commercial borrowing (ECB) norms of the Reserve Bank of India have enabled renewable energy companies and other firms to tap the ECB route for raising finance through green bonds and sustainable bonds, reflecting the growing attractiveness of this route for raising finance, according to the Survey.

Under the chapter ‘Sustainable Development and Climate Change’, the Survey said climate change-related financial risks pose both micro and macro prudential concerns and listed out various intiatives taken by the central bank in dealing with financial risks associated with climate change.

In May 2021, the RBI set up a new unit ‘Sustainable Finance Group’ (SFG) within its Department of Regulation to effectively counter these risks, and for leading the regulatory initiatives in the areas of sustainable finance and climate risk. 

The survey also added that India is actively contributing to the global efforts towards green finance and the RBI joined the Central Banks and Supervisors Network for Greening the Financial System (NGFS) as a member on April 23, 2021 and has begun participating in the work streams of the NGFS. 

The concept of green and sustainable financing is gaining prominence among investors, corporarte and policymakers across the globe. Sustainable finance refers to the philosophy of investing in projects or companies by taking into account the environmental, social and governance (ESG) factors. 

Investments in sustainable economic projects include energy generation through renewable sources like solar, wind, biogas, etc.; clean transportation and energy efficient projects like green building etc. 

As part of the green finance initiative, the Reserve Bank included the small renewable energy sector under its Priority Sector Lending (PSL) scheme in 2015. 

According to recent article ‘Green Finance in India: Progress and Challenges’ by Saurabh Ghosh, Siddhartha Nath and Abhishek Ranjan of the Strategic Research Unit of Department of Economic and Policy Research (DEPR), the aggregate outstanding bank credit to the non-conventional energy sector was around ₹36,543 crore, constituting 7.9 per cent of the outstanding bank credit to the power generation as of March 2020. It was 5.4 per cent in March 2015. 

India started issuing green bonds in 2015. According to the DEPR report, the outstanding amount of green bonds in India as of Feb 12, 2020 stood at US$16.3 billion, constituting about 0.7 per cent of all the bonds issued in the Indian financial market. 

A recent report by S&P Global market intelligence said India’s green bond issuance is set to reach a new record in 2022, following an exceptionally strong 2021.

The first two weeks of the current calendar year already saw several Indian corporates like India Clean Energy Holdings, Indian Railway Finance Corporation (IRFC), JSW Infrastructure issuing dollar-denominated green bonds and Sustainability-Linked Bonds (SLBs).

In November 2021, Prime Minister Narendra Modi made a commitment at the 26th Conference of Parties (COP-26) in Glasgow that India will achieve net-zero emissions by 2070. 

“There is a greater thrust on climate action following the announcement of India’s target of becoming Net Zero by 2070. Climate finance will remain critical to successful climate action by developing countries, including India.” the Economic Survey said.