The report "Bridging India’s Sustainable Finance Gap" by EY highlights the country’s growing need for sustainable finance solutions to address environmental, social, and governance (ESG) concerns and contribute to a low-carbon economy. The report emphasizes that India is facing a significant sustainable finance gap, estimated to be around $200 billion to $300 billion, to achieve its climate goals.
The report identifies several key factors contributing to this gap:
- Growing carbon intensity: India’s carbon intensity is higher than its per capita GDP, indicating a precarious situation. With plans to reduce emissions by 35% by 2030, the country needs innovative financing solutions to support this ambition.
- Limited access to capital: Many Indian companies, especially small and medium enterprises (SMEs), lack access to capital, making it difficult for them to adopt sustainable practices and technologies. This gap can be filled by impact investing, green bonds, and other sustainable finance instruments.
- Insufficient allocation of funds: India’s green bond market is small and fragmented, with limited issuance of green bonds and other sustainable debt instruments. The country needs more private sector investments in sustainable projects and initiatives.
To bridge this gap, the report suggests the following strategies:
- Strengthen green bond market: Governments, corporations, and financial institutions should collaborate to create a more vibrant green bond market, providing access to capital for sustainable projects.
- Enhance impact investing: Impact investors, philanthropic organizations, and private equity players can support sustainable projects and initiatives, creating a multiplier effect in the economy.
- Foster a culture of sustainability: Businesses, governments, and individuals must adopt sustainable practices, encouraging a shift towards conscious consumption and long-term, sustainable decision-making.
- Integrate ESG into mainstream finance: Banking, insurance, and asset management firms should integrate ESG considerations into their decision-making, promoting a more sustainable financial sector.
To achieve these goals, the report emphasizes the need for:
- Increased collaboration between public and private entities, as well as national and international stakeholders.
- Amendments to regulations, enabling policy support for sustainable finance and ESG considerations.
- Awareness and education, promoting a culture of sustainability among businesses, governments, and the broader public.
- Data and analytics, providing insights on ESG performance and market trends to inform investment decisions.
By bridging the sustainable finance gap, India can unlock new opportunities, create jobs, and contribute to a more sustainable, resilient economy, while achieving its climate goals and promoting economic growth.