Answer:

Green Finance refers to financial investments flowing towards sustainable development projects and initiatives. The thematic areas that Green Finance covers are clean energy, energy efficiencies, sustainable transport, water and waste management, biofuels etc.

Importance of Green Finance

Green finance has attained a lot of importance in the past few years due to increased focus of Green development. In 2015, green bonds issued by governments, banks, corporate and individual projects amounted to USD 42 billion.

Green Finance is very relevant in the context of India. The Indian government policies and programs in various sectors require huge funding and most of these are related to sustainable development. Attainment of renewable energy target of 160 GW by 2022, development of smart cities, providing green infrastructure in terms of transport etc. requires Green Finance.

The resources of the public sectors are constrained and there is an urgent need for private finances to invest in green projects and infrastructure development. For this, developing countries like India need to develop a robust green bond market through international collaboration in information and knowledge sharing and encouraging private sector to invest

The major issues related to Green Finances are:

♤ Lack of internationally agreed universal definition of Green Finance with specific standards in terms of use of proceeds, evaluations, management of proceeds, financial reporting and procedures.

♤ Most of Green technology is with developed countries and under protected realm of IPR.

♤ Green Finance should not only be limited to renewable energy investments but also to greening of coal technologies and poverty programs etc.

♤ With respect to India, low credit ratings of potential issues of Green Finance and high costs of issuances act as impediments.

♤ Green Finance should also consider unsustainable pattern of consumptions as parameters in deciding finance, particularly conspicuous consumptions and unsustainable lifestyle in developed countries.

India has started issuing green bonds for renewable energy projects. The government needs to provide specific tax incentives, increase PSL targets for Green Finance and diversify the process of Green Finance to areas not limited to renewable energy to realize the full potential.