Data tagging absent in green finance despite rising demand: Study

Climate Policy Initiative, a global analysis and advisory organisation specialising in sustainable finance, is planning to launch a portal to track such investment in the country

Green investment in India outpaced India’s GDP growth during two years starting April 2016. While GDP grew at an average rate of 7.2 per cent during the period, tracked investments suggest an increase of 24 per cent.

While this indicates green investments have the potential for driving the nation’s economic growth, there is no clear definition of such investment in India.

Climate Policy Initiative, a global analysis and advisory organisation specialising in sustainable finance, is planning to launch a portal to track such investments in the country.

Mahua Acharya, Asia director, Climate Policy Initiative, said: “There is lot of climate money in government budgets. But while allocations are known, the ground reality is, they are difficult to track because data comes with a lag.” According to her, climate budget tagging system should be evolved.

Though the Securities and Exchange Board of India (Sebi) came out with green bond guidelines in May 2017, it is limited to issuance, listing, and disclosures of such bonds. The Reserve Bank’s annual report talks about lending for renewable power and priority sector norms, too, have spelt out the same, but a clear definition of green finance is not available.

Acharya said tagging was only the first step since “at the end of the day, borrowers who have taken climate consideration are ploughing the same field as others” in terms of lending norms.

The study, launched on Friday, revealed green finance flows in India was at Rs 1.11 trillion ($17 billion) for FY17 and Rs 1.37 trillion ($21 billion) for FY18. Domestic public green finance expenditure by the government and its agencies was at Rs 71,000 crore for the two years.

The share of international public finance in tracked green finance remained nearly the same in both FY16 and FY17 at 10 per cent or Rs 12,000 crore. Projects put up by public sector undertakings accounted for the largest share of the tracked energy efficiency and power transmission investments, amounting to 34 per cent or Rs 7,000 crore, for 2016-17.

“The tracked green finance falls far short of India’s green finance needs. The tracked green finance for mitigation for FY17 and FY18, averaging Rs 1.24 trillion or $19 billion, represents only about 10 per cent of what the country actually requires,” the study said.

The study also tracked bilateral official development assistance and other official flows from bilateral and multilateral development financial institutions. A massive 55 per cent of these flows went into the development of mass rapid transportation – this largely represents capital expenditure and, therefore, are one-time and do not reveal a trend.

Acharya said the tracking exercise faced issues related to availability, quality, and robustness of investment data with public and private sectors. So, the agency is designing a domestic climate budgeting framework, which will form the basis for comprehensive measurement of green finance in public and private sectors.

A Climate Change Finance Unit (CCFU) was established in 2011 under the ministry of finance as an analytics and support body dedicated to climate financing. The study suggests that apart from providing strategic assistance to the ministry, the CCFU’s responsibilities can be expanded to accommodate a more central coordinating role between various private and public financial institutions and designing a standardised green finance framework for India.