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Informist, Wednesday, Dec. 4, 2024

MUMBAI – It is essential to build capabilities to ensure correct assessment of climate-related risks and put in place suitable adaptation and mitigation measures, Reserve Bank of India's Deputy Governor M. Rajeshwar Rao said at the Institute of South Asian Studies at the National University of Singapore, Delhi on Wednesday. 

He said there are manifold challenges both at the national and international levels for the effective flow of sustainable finance. He said that the first challenge is the inherent risk in green and sustainable projects. "Given the fact that green or sustainable projects are based on relatively newer technologies which are yet to stabilise and are mainstreamed, assessment of financial and techno-economic viability of these projects becomes that much more challenging. This leads to an inherent increased credit risk as compared to traditional projects," Rao said.

He also highlighted the issues faced by partially bankable or non-bankable projects to get credit. "Several issues in the form of data, knowledge and capacity gaps, technical, and institutional constraints limit the proper identification and development of adaptation projects which limits the access to both international as well as private finance," Rao said.

For them, Rao said that there is an urgent need to develop adaptation finance and to "rise above the typical corporate social responsibility linked funding and public investments."

He said that even though the government has come out with several new initiatives for sustainable finance such as Green Hydrogen Mission, National Solar Mission, sovereign green bonds, among others, there is a need to further augment these efforts to address the commercial viability of these projects and the related market failures.