Green banks may raise capital from several sources, including government subsidies, proceeds from environmental policies, circulation of funds from foreign and multilateral financial institutions, issuance of bonds, and other dedicated investment policies. You can.
Government policies that provide tax incentives to investors in green bank products could also increase capital and diversify it. Because some of these funds are unilateral and do not need to be repaid, the cost of capital for green banks is much lower than for commercial banks. This, in turn, will lead to lower confidence in green projects.
Deep financing will still be required to recover funds for reinvestment. However, this would create large positive externalities for the economy as a whole. Apart from reducing emissions, it will lead to more jobs, more investment and more research.
If funds were channeled to farmers and MSMEs through microfinance banks, it would lead to a smoother transition to a greener, circular economy at the grassroots level. This will boost India’s carbon market, with the benefits going to those most vulnerable to the effects of climate change.
After NABARD, green banks could become India’s economic, environmental and development solution to the climate problem.
India needs to achieve net-zero emissions by 2070, which will require huge amounts of funding. Developing countries cannot rely on developed countries to finance green passes. India is one of the leaders in the Global South in combating climate change and needs to set an example in finding a path to a sustainable future.
India has already made notable strides in financial inclusion through fintech, which has also been adopted by several other countries in the Global South. India is also positioned to pave the way for innovative solutions in climate finance, which will lead to climate justice around the world.
Aakash Bajpayee is a student of the Indian Institute of Forest Management and an alumnus of the Tata Institute of Social Sciences.
The views expressed are the author’s own and do not necessarily reflect the views of Down To Earth.
