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Voluntary carbon market ecosystem and framework for enabling Transition Finance instruments is on the anvil: K Rajaraman, Chairman, IFSCA

Oct 10, 2023

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MUMBAI, 10 October 2023: Addressing the second edition of ‘FICCI ESG Summit’, Mr K Rajaraman, Chairman, International Financial Services Centres Authority (IFSCA), yesterday said, “Since the adoption of the Paris Agreement, the landscape of sustainable finance has evolved significantly across various regulatory areas such as taxonomies, disclosure standards, ESG and climate risk management. ESG debt listing, mandatory sustainable lending by banks and disclosure regime of ESG funds are aimed at creating a comprehensive suite of products catering to green and sustainable projects. The objective is to prioritize management of climate related financial risk and preventing greenwashing.”

Stressing upon the importance that IFSCA attaches to ESG and sustainable finance, Mr Rajaraman added, “IFSCA is playing a key role in channelizing funds for India and other emerging economies to meet their net zero ambitions and achieve SDGs by developing IFSC as a global hub for sustainable finance.” Alluding to the quantum of investments required to achieve India’s net zero commitments, Mr Rajaraman highlighted some of the recent initiatives undertaken by IFSCA to create a conducive regulatory environment to channelise sustainable finance flows into India through IFSC including development of innovative financial products in green and sustainable finance.

“The emphasis on ease of doing business, supported by cost-competitive advantages and tax incentives offers unique advantages to Indian corporates for financing their sustainability journey through GIFT IFSC. Some of the new initiatives on developing a voluntary carbon market ecosystem and framework for enabling Transition Finance instruments will benefit Indian companies wanting to create additional global capital flows,” he added.

Mr Dinesh Kumar Khara, Chairman, State Bank of India said, “In the net zero 2050 scenario, India's capital requirement would be 11 per cent of GDP, compared to the global average of about 7.5 per cent. If we look at the short-term target of 2030, the expected annual investment is as high as USD 110 billion. To achieve the corresponding investment requirements, India needs to exploit the rapidly growing pool of global capital, like sovereign wealth funds, global pension, private equity and infrastructure funds.”

Highlighting the importance of incorporating green bonds into India’s climate finance strategy, Mr Khara stated, “The annual share of the top five issuers continued to come down for the third consecutive year indicating that more companies are now participating in the green bond market. Although the value of green bonds issued in India since 2018 constituted a very small portion of the total bond issuance, India maintained a favourable position compared to several advanced and emerging economies. Rupee denominated green bond issuances by Indian corporates are expected to pick up in FY 2024. Liberalised external commercial borrowing norms have also enabled Indian companies to raise offshore finance through green bonds, social bonds, sustainable bonds and sustainability linked bonds. Mechanisms such as blended finance are also being utilized to finance climate and sustainability related projects.

Mr Khara further added that some policy measures such as deepening of corporate bond market, consistent corporate reporting and removing information asymmetry would make a significant contribution in addressing some of the shortcomings of the green finance market. He also stated that SBI has been incorporating environmental, social and governance related criteria into its lending decisions. He hailed the financial sector as well positioned to catalyse positive change in corporates and contribute towards building a sustainable society.

Mr Sanjiv Mehta, Immediate Past President, FICCI & President Commissioner, Unilever Indonesia said, “Business and brands must be a force for good, business must be driven by purpose and values, having a multistakeholder model is important, building innovations, adopting a value chain approach, building capabilities in the entire ecosystem and building sustainability into the managerial remuneration are critical to achieve success.” He emphatically shared how ESG considerations have been hardwired into the core values and mission of Hindustan Unilever, sharing his suggestions for mainstreaming ESG parameters into corporate strategy to achieve enhanced value creation, cost reduction in the long run and improved trust and transparency. ESG is a journey and not a destination, added Mr Mehta.

Mr Imtaiyazur Rahman, Chairman, FICCI ESG Committee and MD & CEO, UTI Asset Management Co Ltd said, “India has clearly set its agenda for a sustainable future through its commitment to achieve SDG goals by 2030 and Net Zero goals by 2070. Considering that climate change is a key dimension of ESG consideration for businesses, corporate strategy should be closely linked to environment related priorities, as much as governance and social issues.” He also advocated for collaborative action for meaningful results.

Mr Amit Tandon, Co-Chair, FICCI ESG Committee and Founder & MD, IiAS delivered the vote of thanks..

The summit also brought together thought leaders from the industry to facilitate discussion and sharing of views and emerging practices on India’s journey in E, S and G transformation.

FICCI Publication - The Experts’ Voice, a compendium of articles on ESG was released during the inaugural session.

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