A high-powered taskforce set up by the Confederation of Indian Industry (CII) has recommended to the government a new green finance institution to create a transparent pathway for investments in climate, streamlining and strengthening the Securities and Exchange Board of India (Sebi)-mandated Business Responsibility and Sustainability Reporting Framework (BRSR) and broadening sustainability reporting.
The report, released on Friday by former Union minister and taskforce chairman Jayant Sinha, also called for finalising a climate finance taxonomy.
Tata Steel chief executive officer (CEO) and managing director (MD) T V Narendran, former MD & CEO of Ashok Leyland Vipin Sondhi and Rajat Gupta, senior partner, McKinsey & Company, are among the other members of the high-powered task force.
The taskforce was constituted to develop a roadmap to make Indian industries investment-ready, enhancing corporate sustainability performance, improving transparency, leveraging technology for a sustainable future, balancing competitiveness, and promoting carbon markets and the sustainability policy ecosystem.
“A dedicated green finance institution could build out the ecosystem for climate-aligned investing in multiple ways. First, it would mitigate risks that deter commercial financiers, for example, by providing credit guarantees, insurance, or junior capital that absorb initial losses, thus encouraging banks and investors to participate in green projects. Second, it should mobilise patient, long-duration capital through its funds, guarantees, catalytic instruments and partner financial institutions, overcoming the tenor mismatch in the current system without operating as a conventional balance-sheet lender. Third, such an institution can take on the role of a knowledge and capacity hub, disseminating expertise on climate risk and innovative financing structures across the financial sector,” the report said.
“We are investing $100 to 125 billion right now across our entire energy system. If we have to actually be on the 2070 net-zero trajectory we may have to invest another $100-125 billion more,” Sinha said.
He said if India has to close the financing gap it will have to provide more incentives.
“And, that is why there is a need for blended finance. And, we are proposing a green finance institution (GFI) that can originate, syndicate and scale up these kinds of blended finance instruments to close the financing gap,” Sinha added.
The report said proposed finance institution will help catalyse up to $1 trillion of investments over a 5 to 10-year period.
“The green taxonomy has been pending for some time. We think it’s very important to actually get closure on that because it will help in attracting investments and reducing uncertainty that’s in the minds of both industry and investors. We can see this as a living document; we can keep adjusting it over time,” Sinha said.
A green taxonomy classifies economic activities in line with a country’s climate goals and transition pathway while Sebi’s BRSR is a mandatory framework for prominent listed companies to report on sustainability related factors quantitatively.
“It (BRSR) needs to be sector specific. It needs to also extend beyond 1,000 listed companies. There are many unlisted companies which also have emissions. Just going by market cap is not correct. Importantly, we have to move towards the international standards which have been agreed by most of the jurisdictions — that is the International Society of Sustainability Professionals or International Financial Reporting Standards — that would need a lot of industry support,” said Ajay Tyagi, cochairman of the taskforce and former chairperson of Sebi.
“But they (industries) must understand that unless we go to the international standards, funding which is a huge requirement for net zero will not come,” Tyagi added.
