Sustainable Finance: A Regulator’s Perspective On Its Cause And Case

Mekhla Chakraborty, Amity University, Kolkata

ABSTRACT

The palpable effects of climate change have prompted countries to rethink their environmental policies. The drift towards sustainable finance is, thus, imminent. India’s step in the direction though gradual has been significant. With India’s Panchamrit targets announced at COP 26, it is important to increment India’s green deposits market. As such, the potential of green bonds in achieving the same must be considered. The global green bonds market is expected to reach USD 914.4 billion by 2030 but the potential of the market is fraught with problems like ill framed regulations, lack of standardized green taxonomies, green washing concerns, etc. scarring their credibility. The author in this paper argues that the Government of India in collaboration with the sectoral regulators, RBI must take up this onerous responsibility of regulating the green deposits market, predominantly the green bonds market in furtherance of India’s Nationally Determined Contributions (NDCs) under the Paris Agreement. The author also enumerates RBIs role in tackling climate related risks through its participation in the carbon credits market, recalibrating its priority sector lending policies and rethinking the detriments of usage of cotton currency in India. The paper discusses international best practices and analyzes their potential incorporation in India’s policy landscape. The role of artificial intelligence in combating green washing tactics have also also been discussed in the paper.