Defining ‘green’ is critical to achieving India’s ambitious Glasgow climate targets

Global acclaim and accolades are coming India’s way after Prime Minister Narendra Modi presented his five-point agenda, which he called the ‘panchamrit’ (nectar elements), while delivering the ‘National Statement’ at the COP26 conference in Glasgow. The first agenda of the ‘panchamrit’ is to raise the non-fossil fuel-based energy capacity of the country to 500 GW by 2030. Also, by 2030, 50 percent of the country’s power requirements would be met using renewable energy capacities. While reducing the total projected carbon emission by one billion tonne between now and 2030, the economy’s carbon intensity would also be reduced to less than 45 percent by 2030.

In addition, India would achieve net-zero emissions by 2070.

These are visionary targets that would require the government, the private sector, and the finance industry to work in tandem to deliver never-before-seen results. While government intent and private sector appetite for green investments are at a historic high, challenges in securing green capital still seem insurmountable. The lack of definitive agreement at COP26 in Glasgow further illustrates that a lot of work is required to unlock green capital at a scale and speed required. Green or climate finance picks up pace The OECD estimates indicate that in 2019, developed nations mobilised $79.6 billion in the form of climate finance to developing countries. Another WRI research unearths that most of the developed economies aren’t contributing fairly to meet the $100-billion climate finance goal. While government-supported climate finance failed to meet the target, ESG (environmental, social and governance)-related private investment has grown considerably in the past few years. In addition, estimation by UNCTAD (United Nations Conference on Trade and Development) also showed recent inclination of capital markets towards SDG (Sustainable Development Goals)-based outcomes as sustainability themed investment increased to $3.2 trillion in 2020, an 80 percent jump from 2019. These investment products consist of over $1.7 trillion of sustainable funds, green bonds of over $1 trillion, $212 billion of social bonds, and mixed-sustainability bonds to the tune of $218 billion. However, most green finance is invested in developed economies. The impact of such investments on sustainable development can be truly realised if more funds are invested in developing and transition economies as majority of energy growth is expected in these markets. Interestingly, a coalition of the global investment behemoths, banking sector leaders, and insurance firms that holds control over $ 130 trillion recently committed to financing projects that would help reach net-zero emissions by 2050. In COP26, India emphasised that climate finance of $1 trillion is expected from developed countries “at the earliest” in lieu of its new commitments. In addition to traditional risks associated with investing in developing economies, the uncertainty around the definition of ‘what are green activities’ is also a significant impediment. Greenwashing—a Threat In the last 10 years, due to pressures from media, shareholders, and governments, some of the world’s largest investors have started investing in green projects. But inconsistencies in defining what activities qualify as green are continuously increasing the risk of greenwashing. Greenwashing—a phenomenon where many project developers packaged ‘non-green’ projects or ‘questionably green’ projects and branded them as green investment opportunities—significantly affected investor confidence. Many investors do not have the time and resources to examine and evaluate each project’s technologies in terms of ‘climate friendliness’ and they look to regional government documents for clarity. The threat of greenwashing is especially high in developing countries due to less mature definitions for ‘what is green’. This can dent the integrity of the market and increase the risk of damaging investor perception and demand. A consistent classification system of economic activities on the basis of their environmental impact helps the stakeholders have a better understanding of the projects. In the long term, this will facilitate the development of such projects and make accessing green finance more affordable. Facilitating green projects As highlighted by the prime minister, climate adaptation has not received as much attention as climate mitigation. Taxonomy is used as a tool in identifying such under-investment areas and bridging that gap with a suitable green financing source. A screening of economic activities will have an important implication for developing the sustainable/green/climate finance market. It is an important step to show the investment opportunities that can be included in the gamut of green. This visibility and transparency are the foundation for catalysing the right environment to scale up the green capital flow. The European Union (EU) finalised the world’s first green taxonomy to facilitate their half-trillion Euro green deal. Indian green taxonomy might be solicited when we negotiate for green funds in the future. Countries like Bangladesh, Mongolia, China and Indonesia also have released some form of green taxonomy. A big investor will prefer to invest in countries with published taxonomies rather than countries with challenging ‘definitions of green’. Not just governments like the EU, private investors are stepping up for green definitions and standards where a coalition of global firms and banks are coming together to work on carbon offset standards. This shows that taxonomy is quickly becoming a fulcrum on which the climate fight is going to be waged. A well-designed taxonomy will put India on the green finance map and nudge India towards its climate and growth goals as envisioned by the prime minister in Glasgow. Amitabh Kant is CEO, NITI Aayog. Dr Sweety Pandey is a young professional with NITI Aayog. The views expressed in this article and those of the authors and do not represent the stand of this publication Read all the  Latest News ,  Trending News ,  Cricket News ,  Bollywood News ,  India News  and  Entertainment News  here. Follow us on  Facebook,  Twitter and  Instagram.