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National policy Investment
• Ministry of Finance • Commercial banks (public and private)
• Sectoral ministries (e.g., Ministry of • Industry
• Financial institutions (e.g., equity, NBFI)
Environment, Forest and Climate Change)
• Reserve Bank of India
• State finance, planning and sectoral
departments
• Municipal corporations
• Special institutions (e.g., IREDA)
Norms and rating agencies
• Banking norms (e.g., Basel III)
• International financial reporting systems
• Rating agencies
Global governance
• International Monetary Fund (IMF)
• World Trade Organization (WTO)
• The World Bank, UN bodies, and international agencies
Figure 2.1 Actors in the Global Financial Architecture
Source: Author’s compilation
related risks (Table 2.2). It may be reasonable to say that there is no 3.2
way to measure actions in sustainability or climate actions through a
method, including financial accounting, most understandable to the
investment side players.
There have been attempts to measure sustainability for investors,
such as the Equator Principles and the Triple Bottom Line, but both
these practices are for measuring environmental and social risks; they
do not affect the actual bottom line (net profits) at all. Only if there is
a liability which is real and present, will it get reported in the balance
sheet as a liability. Environmental and social liability should have a
‘valuation’ with a timeline attached and clarity in terms of causality.
When these criteria are met, the environmental and social liabilities
will start affecting the net profits of a firm.
Investment related decision-making is also made on financial ratios,
which thus play an important role in this kind of decision-making. There
is a need for a method—similar to financial ratio analysis—to obtain
the efficiencies of private finance without getting into the grey area of
actual financial impact reporting of environmental and social factors.
Chapter 2 Innovative Financing for Low Carbon Development 245
• Ministry of Finance • Commercial banks (public and private)
• Sectoral ministries (e.g., Ministry of • Industry
• Financial institutions (e.g., equity, NBFI)
Environment, Forest and Climate Change)
• Reserve Bank of India
• State finance, planning and sectoral
departments
• Municipal corporations
• Special institutions (e.g., IREDA)
Norms and rating agencies
• Banking norms (e.g., Basel III)
• International financial reporting systems
• Rating agencies
Global governance
• International Monetary Fund (IMF)
• World Trade Organization (WTO)
• The World Bank, UN bodies, and international agencies
Figure 2.1 Actors in the Global Financial Architecture
Source: Author’s compilation
related risks (Table 2.2). It may be reasonable to say that there is no 3.2
way to measure actions in sustainability or climate actions through a
method, including financial accounting, most understandable to the
investment side players.
There have been attempts to measure sustainability for investors,
such as the Equator Principles and the Triple Bottom Line, but both
these practices are for measuring environmental and social risks; they
do not affect the actual bottom line (net profits) at all. Only if there is
a liability which is real and present, will it get reported in the balance
sheet as a liability. Environmental and social liability should have a
‘valuation’ with a timeline attached and clarity in terms of causality.
When these criteria are met, the environmental and social liabilities
will start affecting the net profits of a firm.
Investment related decision-making is also made on financial ratios,
which thus play an important role in this kind of decision-making. There
is a need for a method—similar to financial ratio analysis—to obtain
the efficiencies of private finance without getting into the grey area of
actual financial impact reporting of environmental and social factors.
Chapter 2 Innovative Financing for Low Carbon Development 245
