Page 348 - Low Carbon Development in China and India
P. 348
Public sector financing has a definite role to play in pushing LCD 3.2
further. Targeted public sector financing interventions need to be
augmented. This is crucial not just from the point of view of scaling up
and commercializing LCD activities but also to stimulate and mobilize
private sector investment in LCD. Public and private sector institutions
need to be strengthened to respond and anticipate the complexities
and needs emerging in the low carbon space.
Effectively engaging the private sector is crucial to filling the
financing and implementation gap for LCD. Provisions to facilitate
PPPs through providing framework and incentives for urban local
governments in India include the viability gap funding (VGF)
mechanism, formation of the India Infrastructure Finance Corporation
Limited (IIFCL), and the India Infrastructure Project Development
Fund. Risk reduction mechanisms in PPPs for low carbon development
projects are needed, including loan guarantees and mixed equity
funds. There is also a need for a mechanism for enhanced coordination
between public and private sector.
LCD requires capital availability for which it is required to
broaden the sources of funding as well as the way in which these are
intermediated. Traditional finance has not been able to successfully
capture the opportunity to fund the emerging requirements in low
carbon space. Initiatives taken by banks and financial institutions
have not been large scale enough as there is no common framework
or guidelines in India that banks can follow to offer credit for ‘green’
initiatives by organizations and reduce their risks. There has been
some traction in the involvement of banks and financial institutions in
the renewable energy sector; however, other low carbon development
sectors (including MSMEs) need a similar participation from banks.
The RBI can take steps in the direction of bringing financial
innovations, such as designing ‘green’ credit guidelines that can
guide the Indian banks on lending to organizations that would want
to be more sustainable. The guideline can also promote voluntary
sustainability reporting by banks.
Investors should focus on new sources of funds like pension funds
and sovereign wealth funds; burgeoning market of green bonds;
access to capital markets and low cost debt which can help achieve
the financial needs for low carbon development. They should also
constantly evolve suitable policies to securely fund low carbon projects
and streamline their existing policies on these aspects as per market
requirements.
At the same time, building a suitable policy scenario at national level
Chapter 2 Innovative Financing for Low Carbon Development 313
further. Targeted public sector financing interventions need to be
augmented. This is crucial not just from the point of view of scaling up
and commercializing LCD activities but also to stimulate and mobilize
private sector investment in LCD. Public and private sector institutions
need to be strengthened to respond and anticipate the complexities
and needs emerging in the low carbon space.
Effectively engaging the private sector is crucial to filling the
financing and implementation gap for LCD. Provisions to facilitate
PPPs through providing framework and incentives for urban local
governments in India include the viability gap funding (VGF)
mechanism, formation of the India Infrastructure Finance Corporation
Limited (IIFCL), and the India Infrastructure Project Development
Fund. Risk reduction mechanisms in PPPs for low carbon development
projects are needed, including loan guarantees and mixed equity
funds. There is also a need for a mechanism for enhanced coordination
between public and private sector.
LCD requires capital availability for which it is required to
broaden the sources of funding as well as the way in which these are
intermediated. Traditional finance has not been able to successfully
capture the opportunity to fund the emerging requirements in low
carbon space. Initiatives taken by banks and financial institutions
have not been large scale enough as there is no common framework
or guidelines in India that banks can follow to offer credit for ‘green’
initiatives by organizations and reduce their risks. There has been
some traction in the involvement of banks and financial institutions in
the renewable energy sector; however, other low carbon development
sectors (including MSMEs) need a similar participation from banks.
The RBI can take steps in the direction of bringing financial
innovations, such as designing ‘green’ credit guidelines that can
guide the Indian banks on lending to organizations that would want
to be more sustainable. The guideline can also promote voluntary
sustainability reporting by banks.
Investors should focus on new sources of funds like pension funds
and sovereign wealth funds; burgeoning market of green bonds;
access to capital markets and low cost debt which can help achieve
the financial needs for low carbon development. They should also
constantly evolve suitable policies to securely fund low carbon projects
and streamline their existing policies on these aspects as per market
requirements.
At the same time, building a suitable policy scenario at national level
Chapter 2 Innovative Financing for Low Carbon Development 313
