Sustainable climate funding initiatives, which largely comprise the ‘E’ of the ESG transition finance, have long been paid for and regarded only as assurances of bragging rights. Yet, as environmental, social and governance (ESG) action assumes significance, change is in the air. Given the frequency with which weather events are affecting lives and our national commitment to net zero carbon emissions, India Inc.—businesses, financiers and regulatory stakeholders—is to study a ‘whole-government’ approach and come up with a Would do well to come. Equally pragmatic ‘industry investment and financing’ approach to facilitate a sustainable economy.
While appreciable potential has emerged for various forms of renewable energy, including utility-scale solar power, financed through a pool of bank/financial institution loans, bonds and private equity, much has to be done to increase investments round the clock. needed. Supply of Renewable Energy (RTC RE), 365x24x7 RE through improved power storage technologies and energy generators is in demand as increasingly select corporates adhering to sustainability. In addition, the systemic pain points that hinder the development of wind and rooftop solar systems and other renewable energy require policy streamlining.
The development of robust transition finance mechanisms across various industry sectors will be our test in the next decade or two. The 3 ‘R’ mantra of recycle, reuse and reduce will be critical for key sectors of Indian industry to effectively address climate challenges.
Heavy industries, such as iron and steel, can help reduce India’s carbon dioxide exhaust by doing incremental capacity expansion through small ‘scrap based steel process plants’ (recycling) located near urban centers, with blast furnaces instead To link the pollution-heavy integrated factories that convert the ore. Iron and basic oxygen furnaces that turn iron into steel. The big reward: the scrap production process will emit only 0.15 tons of carbon per tonne of crude steel, while the latter emits 2.5 tons of carbon per tonne of crude steel. Once deep decarbonization steel technologies are developed on a commercial scale, including green hydrogen from the electrolysis of water or blue hydrogen from natural gas (where carbon by-products are captured), polluting entities make appropriate technology investments. can choose.
In the energy and commodities sectors where coal and hydrocarbons are essential, refining companies that finance $20-40 million for each imported tanker consignment can do more given the sheer scale of their operations. Business and corporate social responsibility support is needed to promote green technologies and make a bigger CO2 impact. Projects like afforestation of habitats and rejuvenation of lost water bodies should be given priority.
Power distribution companies can do their bit to support electric vehicle (EV) use by upgrading the back-end transformer infrastructure and increasing the accepted load of the connection, which remains as low as 5 kW, allowing most alternatives. Little extra load is left for quick EV battery charging. -Current plug-in point.
In the construction industry, rainwater harvesting (RWH) systems should be a strict precondition for issuing building plan approvals to address groundwater depletion and prevent urban flooding. If water-challenged Tamil Nadu can successfully implement mandatory RWH for all buildings in urban and later rural areas in the early 2000s, surely such best practices will be widely consumed today across the country. areas need to be replicated.
If organizations do not show sufficient initiative, the regulations will likely follow the path adopted by the state to phase out LPG subsidy for endowed users. First the consumers were requested to voluntarily leave the subvention and then the tap was forcibly turned off. Similarly, the regulators will have no option but to follow the 3 ‘C’ script. First persuading, then persuading and eventually forcing India Inc’s backward people, including financiers, to line up to accelerate the green transition.
The Revised Business Responsibility and Sustainability Report (BRSR) framework, which requires listed corporates to disclose specific quantitative metrics under standard templates, and ESG assessment scores offered by credit rating agencies, are early moves in this cajoling phase. .
European banks such as BNP Paribas have taken an early lead by coming out with climate analysis and alignment studies, specifying a carbon transition finance roadmap towards net zero. Recently, interim decarbonization percentage targets were set, envisioning increasing the share of finance available to RE in overall power generation capacity, reducing upstream exposure to oil and increasing the financing share of EVs in the automobile market by 2025 . For all three, the carbon intensity of low bank finance can be measured in terms of grams per kilowatt hour, grams per mega joule and grams per kilometer operated, respectively. Indian banks need to follow this by formulating their own specific strategy. While most banks in India are yet to formulate comprehensive climate funding policies, some that have taken initial steps in that direction have postponed their draft plans.
A green economic transformation and the funding it needs should not be an elusive term, but there is an opportunity Indian corporates and financiers should act immediately before climate action rules hit them hard.
Ashish Kapoor is a banker and author of ‘Singapore Holiday Travelogue’,