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26 November 2015, Gateway House

‘India must grow the green bonds market’

The Conference of Parties (COP21) is beginning on 30 November in Paris, France. Prime Minister Narendra Modi has climate change has one of the top priorities of his foreign policy. Gateway House spoke with Nick Robins, Co-Director, Inquiry into the Design of a Sustainable Financial System, United Nations Environment Programme (UNEP) on green financing and how India can leverage on it to further its energy needs.

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Shubhashish (GH): Co-Director, Inquiry into the Design of a Sustainable Financial System for United Nations Environment Programme. Could you tell us what that means and what do you do?

Nick Robins (NR): UNEP is the international agency looking to promote leadership on looking after the environment, to promoting sustainable development. The Inquiry was set up really to understand how sustainability factored in social, environmental issues, how they should be factored into the rules of the government finance system, what is going on around the world and then saying what should happen next.

GH: You also mentioned the terms which we hear a lot now – sustainable development and green financing. What exactly does green financing mean?

NR: Essentially, it is looking at two aspects – ensuring that all financial activities, whether that is banking or investing or insuring, take account of environmental and social factors in their core due diligence. Second is then obviously to try and look at ways whereby you can scale up financing for, let’s say, green economy priorities – whether that is clean water, clean energy, smart infrastructure, sustainable transport, agriculture and so on.

GH: In India we need nearly $206 billion to fund these initiatives. What can be done to make sure that green financing moves out of public funding and private funding is attracted towards it?

NR:  We’ve had an advisory group chaired by Naina Lal Kidwai which has been looking exactly at this question. What can we do to encourage the banking sector, which is of course at the heart of the system, to allocate more capital in this area. I think there’s been a very large awareness that greater private financial involvement is going to be needed and we’ll be launching our report on India in the coming weeks.

GH: So could you to share some insights from that report?

NR: One of area where there seems to be a lot of potential is the green bonds. I think the challenge for India is that it has still some issues about developing the debt-capital markets in general. But I think some of the work that we’ve been doing is saying that actually this green element could actually help with that overall debt capital market developmental process. So in the report there’ll be quite a few, quite specific recommendations on how policymakers could help to enable the growth of the green bond market. Both by issuers, domestic issuers, but also I think importantly making sure that internationally investors who might have an appetite for green bond issues and they can have easy access to those bonds. So that’s going to be a major theme.

GH: And if you could list some challenges for green financing in India at the moment?

NR: Well I think there are a number of challenges. I suppose you have challenges about the existing policy and regulatory framework. I think another area that is big really is one of capacity and expertise: to ensure that the financial professionals really understand the needs that their consumers might have for green finance. The third challenge which I think is to provide a framework whereby India can attract international flows of finance; clearly public finance, which is a priority within the climate talks, but also international private finance.

GH: The Conference of Parties (COP21) begins on 30 November. There is a lot of chatter around the five year reviews, the INDCs and the solar alliance. What do you make out of all these and where does green financing stand?

NR: Well I think it’s maybe important to reflect and see what these Paris climate talks supposed to achieve. I think the goal is really to make the shift to a low carbon and inclusive economy. And I think in many ways some of the steps towards that have already happened. We know that for example, the technological alternatives are evolving very rapidly. So I’m fairly confident that actually Paris will do the job- that it will put together the framework. I think most, if not all countries, want it to be a success. We’ve got a lot of the key elements in place, and the task is now just for these negotiators to focus on resolving the key elements of text so we can have an agreement.

You can listen to the full interview here.

This interview was exclusively conducted for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

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