GRI Club members discuss the impact of a green taxonomy in India
eMeeting focuses on the green finance landscape and how to encourage sustainable investments
April 13, 2022Infrastructure
On April 12th, GRI Club hosted the eMeeting “Green Taxonomy in India” alongside our partners from Cyril Amarchand Mangaldas. This online event gathered club members, government representatives and experts to debate if a framework standardization would enable more precise tracking of finance flows to infrastructure and energy sectors.
Conversations were centered around how a definition of a green taxonomy in India could be a first step toward developing a robust green finance strategy, and how this strategy and mechanisms would include disclosure of climate change risks in the financial system, directed policy and regulations to incentivize green finance, and penalties for carbon intensive investments.
Santosh Janakiram (Partner, Cyril Amarchand Mangaldas) was the moderator of this debate, attended by our special guests Aditya Trivedi (Director – Business Development, AES – India), Christina Ng (Research & Stakeholder Engagement Leader, Debt Markets, Institute of Energy Economics & Financial Analysis – India), Dharini Mathur (Senior Counsel, IFC), and Neha Kumar (India Programme Manager, Climate Bonds Initiative).
During the meeting, our attendees talked about key issues regarding current ongoing efforts in India. For instance, the industry has a need to set realistic goals taking into consideration sector-specific challenges, given the absence of a national taxonomy for green and sustainable finance in the country. Nowadays, investors do not rely on a common taxonomy framework for green finance, and this has to change.
Another concern is the fact that India still is a coal-dependent economy. Coal accounts for around 55% of the country’s energy needs, which brings major labor implications to the industry. Considering this, it is extremely important that Indian companies take into account global standards and lean towards green and sustainable projects. On the other hand, it is also necessary that the government and the central bank encourage the financing of these shifts.
There may also be environmental challenges to be faced locally while developing a national taxonomy following the World Bank guidelines or the OECD guidelines on how economies should act. A series of problems may arise out of a lack of a taxonomy, such a greenwashing, but leaving entrenched industries such as mining out of a labeling framework could have significant consequences for the domestic economy.
The attendees analyzed potential knock-on effects that a taxonomy could have in bringing more investments to the country, as well as the steps required to build consensus towards a taxonomy and to mitigate greenwashing. Even assuming that a taxonomy is adopted for green/sustainable finance, there are other measures that need to be considered to ensure that an entity is meeting the technical standards necessary to qualify its financial instruments as ‘green’ or ‘sustainable’, in practice. This may necessitate audits, assurances and ratings to support taxonomies and ensure authenticity of disclosures.
When it comes to possible strategies focused on actionable results, there are different approaches to framing taxonomies, and multiple benefits and challenges to overcome. For example, adopting a granular standard may help mitigate greenwashing, but, if the standards are too high, it may be difficult for entities to comply with them.
Join Infra India GRI 2022:
https://www.griclub.org/event/infrastructure/infra-india-gri-2022_1461.html
Take part in Latam GRI Infra & Energy 2022:
https://www.griclub.org/event/infrastructure/latam-gri-infra-energy-2022_3589.html
Written by Lucas Badaracco
Conversations were centered around how a definition of a green taxonomy in India could be a first step toward developing a robust green finance strategy, and how this strategy and mechanisms would include disclosure of climate change risks in the financial system, directed policy and regulations to incentivize green finance, and penalties for carbon intensive investments.
Santosh Janakiram (Partner, Cyril Amarchand Mangaldas) was the moderator of this debate, attended by our special guests Aditya Trivedi (Director – Business Development, AES – India), Christina Ng (Research & Stakeholder Engagement Leader, Debt Markets, Institute of Energy Economics & Financial Analysis – India), Dharini Mathur (Senior Counsel, IFC), and Neha Kumar (India Programme Manager, Climate Bonds Initiative).
Main topics
The discussion can be summed up in the following questions: What is the green finance landscape in India? What are the challenges due to no clear definition of green finance? What are the bottlenecks in designing appropriate taxonomies? How can green taxonomies enhance impact investing projects and boost ESG?During the meeting, our attendees talked about key issues regarding current ongoing efforts in India. For instance, the industry has a need to set realistic goals taking into consideration sector-specific challenges, given the absence of a national taxonomy for green and sustainable finance in the country. Nowadays, investors do not rely on a common taxonomy framework for green finance, and this has to change.
Another concern is the fact that India still is a coal-dependent economy. Coal accounts for around 55% of the country’s energy needs, which brings major labor implications to the industry. Considering this, it is extremely important that Indian companies take into account global standards and lean towards green and sustainable projects. On the other hand, it is also necessary that the government and the central bank encourage the financing of these shifts.
There may also be environmental challenges to be faced locally while developing a national taxonomy following the World Bank guidelines or the OECD guidelines on how economies should act. A series of problems may arise out of a lack of a taxonomy, such a greenwashing, but leaving entrenched industries such as mining out of a labeling framework could have significant consequences for the domestic economy.
The attendees analyzed potential knock-on effects that a taxonomy could have in bringing more investments to the country, as well as the steps required to build consensus towards a taxonomy and to mitigate greenwashing. Even assuming that a taxonomy is adopted for green/sustainable finance, there are other measures that need to be considered to ensure that an entity is meeting the technical standards necessary to qualify its financial instruments as ‘green’ or ‘sustainable’, in practice. This may necessitate audits, assurances and ratings to support taxonomies and ensure authenticity of disclosures.
When it comes to possible strategies focused on actionable results, there are different approaches to framing taxonomies, and multiple benefits and challenges to overcome. For example, adopting a granular standard may help mitigate greenwashing, but, if the standards are too high, it may be difficult for entities to comply with them.
Next conversations
GRI Club’s online and in-person meetings help to connect market leaders to their peers and government representatives, often providing valuable insights that translate into efforts. On August 4th, Infra India GRI 2022, the largest event in infrastructure and energy in the country will take place. Prior to that, next month our members will gather in New York City for the seventh edition of the most relevant infrastructure and energy event in Latin America.Join Infra India GRI 2022:
https://www.griclub.org/event/infrastructure/infra-india-gri-2022_1461.html
Take part in Latam GRI Infra & Energy 2022:
https://www.griclub.org/event/infrastructure/latam-gri-infra-energy-2022_3589.html
Written by Lucas Badaracco
