The Role Of Green Finance In Supporting India's Transition To A Low-Carbon Economy

Savar Verma, Jindal Global Law School

Introduction

There is no doubt that financing and banking are one of the major drivers of growth and innovation in any country or economy. Traditionally financing companies and services have invested in industries and projects that have either harmed the environment or exacerbated the effects of human induced climate change. References can be made to the large industries such as coal, mining, automobile industries and petrochemicals. The finance industry's historical disinterest in ecosystems has contributed to or exacerbated problems including habitat and resource loss, global warming, and pollution. The attitude is further reflected in the abysmal or the minimal amount of investment green initiatives and sustainable business models have received. Due to the global recognition given to climate change and the need for sustainable business models there has been a shift in attitude. The shift can be traced back to the signing of the Paris Agreement (COP 21) which was the most comprehensive international collaboration to address climate change1. The agreement mandated the signatories to reduce carbon emissions and at the same time to transition to a low-carbon economy or net zero carbon emissions. This declaration saw a new interest in green initiatives and projects such as solar energy, wind energy, electric cars etc.

India being a signatory to the Paris Agreement has committed to reduce its carbon emissions and strive to become a carbon neutral country. Thus, due to its commitments there’s lots of interest in the emerging field of “green finance”. Whilst there is technically no hard and fast definition of green finance it could refer to investing or financing activities that promote sustainable environment and development. India’s move towards the low carbon economy is supported by the growing importance of green finance. India has adopted very high level of targets on climate including zero carbon emission target in 2070. Nevertheless, attaining these objectives will entail a substantive economic shift in India.